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NATIONAL  COAL  ASSOCIATION 

Annual  Meeting  □  Chicago  □  May  21,  22,  23,  1919 


Report  and  Suggestions  of  Committee 

on 

Standard  System  of  Accounting 

and 

Analysis  of  Cost  of  Production 

LIBRARY 
OF  THE 

UNIVERSITY  OF  ILLINOIS 


C.  E.  BOCKUS 
THOS.  T.  BREWSTER 
W.  M.  HENDERSON 
J.  C.  OSGOOD 
ERSKINE  RAMSEY 

W.  B.  REED,  Secretary 


Committee 


Report  and  Suggestions  of  Committee 
on  Standard  System  of  Accounting 
and  Analysis  of  Cost  of 
Production 

To  the  Members  of  the  National  Coal  Association: 

The  object  of  the  Committee’s  work  is  to  propose  a  standard  system  of  accounting  under 
which  all  coal  operators,  so  far  as  the  particular  circumstances  of  each  case  will  permit,  will  classify 
their  operating  expenses  for  labor  and  material  in  the  same  way,  to  the  end  that  true,  detailed 
and  comparable  statements  of  cost  of  production  may  be  readily  obtained;  and  also  that  all  operators 
shall  make  the  same  distinctions  between  capital  and  operating  expenditures;  so  that  the  vital 
matters  of  depreciation  and  depletion  and  obsolescence  may  be  treated  with  uniform  consistency 
in  accordance  with  law.  Therefore,  hoping  to  be  successful  in  their  efforts,  the  Committee  has 
endeavored  to  carry  out  its  instructions  to  work  out  such  a  system  of  accounting  as  will  be  accept¬ 
able  to  you,  to  the  Treasury  Department  and  to  the  Federal  Trade  Commission. 

Progress  of  the  report  has  been  dependent  upon  the  enactment  of  the  1918  Revenue  Law  and 
the  issue  of  Treasury  Regulations  thereunder,  and  with  regard  to  the  announced  intention  of  the 
Federal  Trade  Commission  to  issue  revised  report  blanks  and  a  manual  of  instructions  relative 
thereto. 

The  Revenue  Department  has  not,  up  to  the  present  time,  prescribed  exact  methods  of  account¬ 
ing.  Section  212  of  the  Law  of  1918  provides  that  the  taxpayer’s  net  taxable  income  shall  be  com¬ 
puted  upon  the  basis  of  the  taxpayer’s  annual  accounting  period  (fiscal  year  or  calendar  year, 
as  the  case  may  be),  in  accordance  with  the  method  of  accounting  regularly  employed  in  keeping 
the  books  of  such  taxpayer;  provided,  of  course,  that  such  accounting  method  clearly  reflects  the 
income.  Article  24  of  the  Regulations  states,  “It  is  recognized  that  no  uniform  method  of  accounting 
can  be  presented  for  all  taxpayers,  and  the  law  contemplates  that  each  taxpayer  shall  adopt  such 
forms  and  systems  of  accounting  as  are  in  his  judgement  best  suited  to  his  purpose.  Each  taxpayer 
is  required  by  law  to  make  a  return  of  his  true  income.  He  must,  therefore,  maintain  such  account¬ 
ing  records  as  will  enable  him  to  do  so. 

Among  the  essential  provisions  of  Article  24  with  which  the  coal  industry  is  concerned  are, 
that  expenditures  made  during  the  year  should  be  properly  classified  as  between  capital  and  income ; 
and  that  the  charges  for  depreciation,  depletion  and  obsolescense  shall  be  consistent  with  the  facts 
presented  by  the  peculiarities  of  each  case. 

If  the  members  of  the  National  Coal  Association  will  endorse  and  adopt  in  practice  a  uniform 
system  of  accounting,  sound  in  principle,  complying  with  the  provisions  of  the  law  and  the  regu¬ 
lations  pursuant  thereto,  we  have  every  confidence  that  such  system  will  be  acceptable  to  the  Gov¬ 
ernment,  and  that  the  Treasury  Department  will  probably  be  willing  to  accept  Annual  Reports  and 
other  statements  of  any  coal  corporation  complying  with  such  methods,  as  an  Income  Tax  Return. 
Every  corporation’s  Annual  Report  should  show  substantially  the  same  facts  now  required  in  the 
Income  Tax  Returns,  anyway,  and  if  such  reports  be  accepted  by  the  Revenue  Department  as  tax 


2 


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2- 


returns,  the  great  saving  of  time,  expense  and  effort  now  involved  in  rendering  Income  Tax  Returns 
and  other  Government  reports  would  be  saved  to  the  operators,  and  it  is  obvious  that  that  saving 
alone  would  amply  justify  and  compensate  any  operator  for  the  work  and  temporary  inconvenience 
imposed  by  reason  of  his  changing  his  present  accounting  methods  to  conform  to  a  new  and 
approved  plan,  no  matter  how  satisfactory  his  present  methods  may  now  seem  to  him. 


Preliminary  Considerations. 

Before  discussing  the  details  of  an  accounting  system,  it  is  useful  to  emphasize  the  fundamental 
truth  that  every  coal  mine  consists  of:  owned  or  leased  coal  deposits,  plant,  equipment  and  de¬ 
velopment. 

In  the  case  of  some  mines,  the  greater  cost  will  be  the  coal;  in  another,  the  equipment;  and  the 
cost  of  development  will  be,  more  or  less,  according  to  the  physical  conditions  of  each  operation, 
but  all  these  elements  make  a  coal  mine,  and  when  the  operating  stage  is  reached  their  combined 
value  as  a  mine  is  greater  than  the  sum  of  their  separate  costs. 

They  all  depreciate  together  as  the  coal  is  exhausted,  for  when  the  coal  is  gone,  or  the  right  to 
the  coal  has  elapsed,  the  plant  and  equipment  have  little  or  no  value  and  the  development  is  lost. 

Capital  investment  in  a  coal  mine  is  not  a  permanent  asset;  it  is  only  an  outlay  preliminary 
to  the  extraction  of  the  coal;  it  is  merely  an  advanced  or  deferred  charge  upon  future  income,  which 
capital,  if  recovered,  must  be  recovered  with  the  current  expenses  of  operation  out  of  the  proceeds 
of  coal  sold. 

By  dividing  the  cost  of  the  mine  by  the  total  number  of  tons  practically  recoverable  through 
present  shafts  and  openings,  the  rate  per  ton  necessary  to  redeem  such  cost  will  be  found. 

In  Coal  Mining  the  exact  unit  for  the  measurement  of  work  done  is  the  ton  of  coal  mined. 
It  is  also  the  exact  unit  for  measuring  depletion  of  mineral,  wear  and  tear  from  use  of  equipment, 
and  exhaustion  of  development.  Development  is  a  mere  easement,  the  value  of  which  disappears 
when  the  coal  is  gone. 

A  coal  mine  being,  as  emphasized,  made  up  of  several  elements,  all  depreciating  as  the  coal 
is  mined,  such  depreciation  is  composite,  accruing  at  a  rate  concurrent  with  the  rate  of  extraction. 
The  necessary  rate  per  ton  being  determined,  the  aggregate  depreciation  for  any  accounting  period 
should,  of  course,  as  far  as  practical,  be  distributed  among  the  various  elements  in  proportion  to 
their  respective  costs  or  value. 

The  doctrine  that  measures  depreciation  of  coal  mine  plant  and  equipment  in  terms  of  time 
(excepting,  of  course,  some  leasehold  propositions)  is  fallacious,  as  tested  by  the  further  assertion 
that  a  completely  equipped  mine  could  be  maintained  indefinitely  without  depletion  or  wear  and  tear 
if  no  coal  were  mined,  by  minor  repairs. 

Therefore,  we  insist,  as  a  general  rule — excepting  some  leaseholds — that  the  correct  measure 
of  the  depletion  and  depreciation  experienced  in  mining  coal  is  the  ton  of  coal  mined. 

After  a  coal  mine  has  been  developed  and  equipped  to  its  planned  output  capacity,  charges 
to  its  Capital  Account  should  cease,  and  thereafter  there  will  be  few  if  any  permissible  charges  to 
that  account. 

Usually  after  one-third  or  one-half  the  life  of  the  mine  has  elapsed,  and  from  time  to  time 
thereafter  additions  to  power  plant  and  major  items  of  equipment  will  be  necessary,  and  the  Cost 
thereof  should  be  set  up  in  appropriate  Additions  and  Betterment  Accounts,  and  for  these  will 


9397 i 9 


t 


3 


have  to  be  established  an  additional  and  separate  depreciation  rate  based  on  the  remaining  coal 
or  life  of  the  mine. 

At  the  end  of  each  month,  Operating  Account  should  be  charged,  and  Depreciation 
credited  with  an  amount  equivalent  to  the  depreciation  rate  multiplied  by  the  number  of  tons 
mined  during  the  month.  At  the  end  of  the  year  Depreciation  should  be  charged  with  the  year’s 
accumulation  and  the  respective  elements  of  the  mine  written  off  in  proper  proportions.  If,  however, 
the  operator  prefers  to  allow  total  Depreciation  to  stand  as  a  credit' on  the  ledger,  it  should  in  the 
Balance  Sheet  be  exhibited  as  a  deduction  from  the  cost  of  property.  Irrespective  of  which  way  it 
is  handled  on  the  General  Ledger,  the  proper  reducing  entries  should  be  made  against  each  element 
of  the  property  in  the  Plant  Ledger. 

In  the  case  of  mines  operated  under  lease,  if  the  leasehold  rights  run  longer  than  the  probable 
period  required  to  exhaust  the  estimated  available  coal,  the  same  factor  of  Depreciation  applies; 
but  if  the  life  of  the  lease  is  shorter  than  the  probable  period  required  to  get  all  the  coal,  the  monthly 
charge  to  Operating  Account  and  corresponding  credit  to  Depreciation  should  be  such  propor¬ 
tion  of  the  cost  of  the  mine  as  one  month  is  of  the  remaining  term  of  the  lease. 

Funds  representing  Depreciation  accumulations,  if  not  periodically  applied  to  the  retirement 
of  outstanding  securities  or  obligations,  should  be  kept  liquid  for  that  purpose  or  invested  in  assets 
distinct  from  the  depreciating  property. 

Before  any  profit  or  net  income  can  be  realized,  current  expenses  for  labor  and  for  material 
consumed,  current  repairs,  replacements  and  depreciation  must  be  made  good  out  of  gross  income. 

Hence,  sound  consideration  of  the  nature  of  investment  in  coal  mining  or  any  other  wasting 
industry  dictates  that  all  outlay  must  be  classified  and  dealt  with  as  follows: 

(a)  The  initial  cost  of  the  mine  in  its  entirety,  chargeable  to  Capital  Account — and  which 
must  be  redeemed  by  periodically  setting  aside,  from  current  gross  income,  sufficient  amounts  to 
replace  such  investment  within  the  life  of  the  mine.  It  is  obvious  that  the  fund  thus  derived  must 
be  held  inviolate  for  ultimate  capital  redemption,  and  if  not  applied  immediately  to  the  retirement 
of  outstanding  securities,  invested  in  assets  separate  from  the  depreciating  property  or  kept  liquid 
in  the  business. 

(b)  The  cost  of  Additions  and  Betterments,  so  large  that  such  costs  should  be  capitalized, 
must  likewise  be  redeemed  by  setting  aside  from  gross  income  adequate  provision  for  reimbursing 
such  cost  during  the  life  of  the  mine. 

(c)  To  ordinary  Operating  Expense  should  be  charged  the  cost  of  repairs  and  replacements 
of  plant  and  equipment,  and  also  cost  of  additional  equipment  necessary  because  of  the  extension 
of  workings  to  maintain  the  normal  output. 

That  the  propositions  above  stated  are  acceptable  to  the  Treasury  Department  is  shown  by 
various  articles  embodied  in  Treasury  Regulations  No.  45,  recently  issued,  which  might  be  well 
covered  by  reference  to  the  articles,  but  for  your  convenience  and  to  add  authoritative  emphasis 
to  our  claims,  the  complete  text  of  the  articles  referred  to,  so  far  as  seems  necessary,  is  reproduced 
in  full  as  follows: 


DEDUCTIONS  ALLOWED:  DEPLETION, 

[Sec.  214.  (a)  That  in  computing  net  income  there  shall  be  allowed  as  deductions:] 
(10)  In  the  case  of  mines,  oil  and  gas  wells,  other  natural  deposits,  and  timber, 
a  reasonable  allowance  for  depletion  and  for  depreciation  of  improvements,  according  to 
the  peculiar  conditions  in  each  case,  based  upon  cost  including  cost  of  development  not 


4. 


otherwise  deducted:  Provided,  That  in  the  case  of  such  properties  acquired  prior  to  March 
1,  1913,  the  fair  market  value  of  the  property  (or  the  taxpayer’s  interest  therein)  on  that 
date  shall  be  taken  in  lieu  of  cost  up  to  that  date;  such  reasonable  allowance  in  all  the  above 
cases  to  be  made  under  rules  and  regulations  to  be  prescribed  by  the  Commissioner  with 
the  approval  of  the  Secretary.  In  the  case  of  leases  the  deductions  allowed  by  this  para¬ 
graph  shall  be  equitably  apportioned  between  the  lessor  and  lessee;  *  *  * 

Art.  201.  Depletion  of  mines. — The  essence  of  this  provision  is  that  the  owner  of 
such  property,  whether  it  be  a  leasehold  or  freehold,  shall  secure  through  an  aggregate 
of  annual  depletion  and  depreciation  deductions  a  return  of  the  amount  of  capital  invested 
by  him  in  the  property,  or  in  lieu  thereof  an  amount  equal  to  the  fair  market  value  as  of 
March  1,  1913,  of  the  properties  owned  prior  to  that  date,  plus  in  any  case  the  subsequent 
cost  of  plant  and  equipment  (less  salvage  value)  and  underground  and  overground  devel¬ 
opment,  which  is  not  chargeable  to  current  operating  espense,  but  not  including  land 
values  for  purposes  other  than  the  extraction  of  minerals.  Operating  owners,  lessors  and 
lessees  are  entitled  to  deduct  an  allowance  for  depletion. 

Art.  202.  Capital  recoverable  through  depletion  allowance  in  the  case  of  owner. — 

In  the  case  of  an  operating  owner  in  fee  or  a  lessor  the  capital  remaining  in  any  year  re¬ 
coverable  through  depletion  allowances  is  the  sum  of  (a)  the  cost  of  the  property,  or  its 
fair  market  value  as  of  March  1,  1913,  plus  (b)  the  cost  of  subsequent  improvements  and 
development  not  charged  to  current  operating  expenses,  but  minus  (c)  deductions  for 
depletion  which  has  or  should  have  been  taken  to  date,  and  (d)  the  portion  of  the  capital 
account,  if  any,  as  to  which  depreciation  has  been  and  is  being  deducted  instead  of  deple¬ 
tion.  The  value  of  the  surface  of  the  land  should  be  taken  into  consideration.  In  no  case, 
however,  may  a  lessor  include  in  his  capital  recoverable  through  such  an  allowance  any 
part  of  development  costs  not  borne  by  the  lessor. 

Art.  203.  Capital  recoverable  through  depletion  allowance  in  the  case  of  lessee. — 

In  the  case  of  a  lessee  the  capital  remaining  in  any  year  recoverable  through  depletion 
allowances  is  the  sum  of  (a)  the  cost  of  the  leasehold,  or  its  fair  market  value  as  of  March 
1,  1913,  plus  (b)  the  cost  of  subsequent  improvements  and  development  not  charged  to 
current  operating  expenses,  but  minus  (c)  deductions  for  depletion  which  has  or 
should  have  been  taken  to  date,  and  (d)  the  portion  of  the  capital  account, 
if  any,  as  to  which  depreciation  has  been  and  is  being  deducted  instead  of  depletion. 
Any  annual  or  periodical  rents  or  royalties  supplementing  the  bonus  or  other  amount 
paid  for  the  lease  may  be  charged  to  current  operating  expenses  or,  until  the  property 
reaches  the  operating  stage,  to  capital  account,  and  in  the  latter  event  will  form  part  of 
the  capital  returnable  through  deductions  for  depletion. 

Art.  205.  Determination  of  cost  of  deposits. — In  any  case  in  which  a  depletion  or 
depreciation  deduction  is  computed  on  the  basis  of  the  cost  or  price  at  which  any  mine, 
mineral  deposit,  mineral  right  or  leasehold  was  acquired,  the  owner  or  lessee  will  be  required 
upon  request  of  the  Commissioner  to  show  that  the  cost  or  price  at  which  the  property 
was  bought  was  fixed  for  the  purpose  of  a  bona  fide  purchase  and  sale,  by  which  the  property 
passed  to  an  owner  in  fact  as  well  as  in  form  different  from  the  vendor.  No  fictitious  or 
inflated  cost  or  price  will  be  permitted  to  form  the  basis  of  any  calculation  of  a  depletion 
or  depreciation  deduction,  and  in  determining  whether  or  not  the  price  or  cost  at  which 
any  purchase  or  sale  was  made  represented  the  actual  market  value  of  the  property  sold, 
due  weight  will  be  given  to  the  relationship  or  connection  existing  between  the  person 
selling  the  property  and  the  buyer  thereof. 


5 


Art.  206.  Determination  of  fair  market  value  of  deposits. — Where  the  fair  market 
value  of  the  property  at  a  specified  date  in  lieu  of  the  cost  thereof  is  the  basis  for  depletion 
and  depreciation  deductions,  such  value  must  be  determined,  subject  to  approval  or 
revision  by  the  Commissioner,  by  the  owner  of  the  property  in  the  light  of  the  conditions 
and  circumstances  known  at  that  date,  regardless  of  later  discoveries  or  developments 
in  the  property  or  in  methods  of  mining  or  extraction.  The  value  sought  should  be  that 
established  assuming  a  transfer  between  a  willing  seller  and  a  willing  buyer  as  of  that 
particular  date.  No  rule  or  method  of  determining  the  fair  market  value  of  mineral 
property  is  prescribed,  but  the  Commissioner  will  lend  due  weight  and  consideration  to 
any  and  all  factors  and  evidence  having  a  bearing  on  the  market  value,  such  as  cost, 
actual  sales  and  transfers  of  similar  properties,  market  value  of  stock  or  shares,  royalties 
and  rentals,  value  fixed  by  the  owner  for  purposes  of  the  capital  stock  tax,  valuation  for 
local  or  State  taxation,  partnership  accountings,  records  of  litigation  in  which  the  value  of 
the  property  was  in  question,  the  amount  at  which  the  property  may  have  been  inventoried 
in  probate  court,  disinterested  appraisals  by  approved  methods,  and  other  factors. 

Art.  207.  Revaluation  of  deposits  not  allowed. — The  cost  of  the  property  or  its  fair 
market  value  at  a  specified  date,  as  the  case  may  be,  plus  subsequent  charges  to  capital 
account  not  deductible  as  current  expense,  will  be  the  basis  for  determining  the  depletion 
and  depreciation  deductions  for  each  year  during  the  continuance  of  the  ownership 
under  which  the  fair  market  value  or  cost  was  fixed,  and  during  such  ownership  there  can 
be  no  revaluation  for  the  purpose  of  this  deduction.  This  rule  will  not  forbid  the  redistribu¬ 
tion  of  the  capital  account  over  the  estimated  number  of  units  remaining  in  the  property 
in  accordance  with  either  of  the  next  two  articles. 

Art.  208.  Determination  of  quantity  of  ore  and  mineral  in  mine. — Every  taxpayer 
claiming  a  deduction  for  depletion  will  be  required  to  estimate  with  respect  to  each  separate 
property  the  total  units  (tons,  pounds,  ounces  or  other  units)  of  ores  and  minerals  reason¬ 
ably  known  or  on  good  evidence  believed  to  have  existed  in  the  ground  on  March  1,  1913, 
or  on  the  date  of  acquisition  of  the  property,  as  the  case  may  be.  In  estimating  the  total 
units  of  ores  and  minerals  for  purposes  of  depletion,  the  property  must  be  considered  in 
the  condition  in  which  it  was  on  March  1,  1913,  or  the  date  of  acquisition,  but  if  subse¬ 
quently  during  the  ownership  of  the  taxpayer  making  the  return  additional  recoverable 
mineral  deposits  have  been  discovered  or  developed  which  were  not  taken  into  account  in 
estimating  the  number  of  units  for  purposes  of  depletion,  or  if  it  shall  be  discovered  by 
working,  development  or  exploration  that  ground  previously  estimated  to  contain  com¬ 
mercially  recoverable  mineral  is  barren  or  contains  only  commercially  unworkable  mineral, 
a  new  estimate  of  the  recoverable  units  of  ores  or  minerals  (but  not  of  the  cost  or  fair 
market  value  at  a  specified  date)  shall  be  made,  and  when  made  shall  thereafter  constitute 
a  basis  for  depletion.  In  the  selection  of  the  unit  of  estimate  the  custom  or  practice 
applicable  to  the  type  of  mineral  deposit  and  the  character  of  the  operations  thereon 
should  be  considered.  The  estimate  of  the  recoverable  units  of  ores  or  minerals  for  the 
purpose  of  depletion  shall  include  (a)  the  ores  and  minerals  “in  sight,”  “blocked  out,” 
“developed,”  or  “assured,”  in  the  usual  or  conventional  meaning  of  these  terms  in  respect 
to  the  type  of  deposit,  and  may  also  include  (b)  “prospective”  or  “probable”  ores  and 
minerals  (in  the  same  sense) ;  that  is,  ores  and  minerals  that  are  believed  to  exist  on  the 
basis  of  good  evidence,  although  not  actually  known  to  occur  on  the  basis  of  existing 
development;  but  “probable”  or  “prospective”  ores  and  minerals  may  be  computed  for 
purposes  of  depletion  only  as  extensions  of  known  deposits  into  undeveloped  ground. 

Art.  210.  Computation  of  allowance  for  depletion  of  mines. — When  the  cost  or 
value  as  of  March  1,  1913,  of  the  property  shall  have  been  determined,  and  the  number  of 


6 


mineral  units  in  the  property  as  of  the  date  of  acquisition  or  valuation  shall  have  been 
estimated,  the  division  of  the  former  amount  by  the  latter  figure  will  give  the  unit  value 
for  purposes  of  depletion,  and  the  depletion  allowance  for  the  taxable  year  may  be  com¬ 
puted  by  multiplying  such  unit  value  by  the  number  of  units  of  mineral  extracted  during 
the  year.  If,  however,  proper  additions  are  made  to  the  capital  account  represented  by 
the  original  cost  or  value  of  the  property,  or  unforeseen  circumstances  necessitate  a  revised 
estimate  of  the  number  of  mineral  units  in  the  ground,  a  new  unit  value  for  purposes  of 
depletion  may  be  found  by  dividing  the  capital  account  at  the  end  of  the  year,  less  deduc¬ 
tions  for  depletion  to  the  beginning  of  the  taxable  year,  which  have  or  should  have  been 
taken,  by  the  number  of  units  in  the  ground  at  the  beginning  of  the  taxable  year.  This 
number,  unless  a  revision  of  the  original  estimate  has  been  necessary,  will  equal  the  number 
of  units  in  the  ground  at  the  date  of  original  acquisition  or  valuation  less  the  number 
extracted  prior  to  the  taxable  year.  If,  however,  a  recalculation  is  needed,  the  number 
of  units  at  the  beginning  of  the  year  will  be  the  sum  of  the  gross  production  of  the  year  and 
the  estimated  mineral  reserves  in  the  property  at  the  end  of  the  year. 

Art.  215.  Depletion  of  mine  based  on  advance  royalties. — Where  the  owner  has 
leased  a  mining  property  for  a  term  of  years  with  a  requirement  in  the  lease  that  the 
lessee  shall  mine  and  pay  for  annually  a  specified  number  of  tons  or  other  agreed  units  of 
measurement  of  such  mineral,  or  shall  pay  annually  a  specified  sum  of  money  which  shall 
be  applied  in  payment  of  the  purchase  price  or  agreed  royalty  per  unit  of  such  mineral 
whenever  the  same  shall  thereafter  be  mined  and  removed  from  the  leased  premises,  the 
value  in  the  ground  to  the  lessor  for  purposes  of  depletion  of  the  number  of  units  so  paid 
for  in  advance  of  mining  will  constitute  an  allowable  deduction  from  the  gross  income 
of  the  year  in  which  such  payment  or  payments  shall  be  made ;  but  no  deduction  for  deple¬ 
tion  by  the  lessor  shall  be  claimed  or  allowed  in  any  subsequent  year  on  account  of  the 
mining  or  removal  in  such  year  of  any  ore  or  mineral  so  paid  for  in  advance  and  for  which 
deduction  has  been  once  made.  If  for  any  reason  any  such  mining  lease  shall  be  terminated 
before  the  ore  or  mineral  therein  which  has  been  paid  for  in  advance  has  been  mined  and 
removed,  and  the  lessor  repossesses  the  leased  property,  an  amount  equal  to  the  aggregate 
deductions  for  depletion  allowed  in  respect  of  ore  or  mineral  not  mined  and  removed  by 
the  lessee,  but  still  in  the  ground,  will  be  deemed  income  to  the  lessor  and  will  be  returned 
as  such  for  the  year  in  which  the  property  is  repossessed. 

Art.  216.  Depletion  and  depreciation  accounts  on  books. — Every  taxpayer  claiming 
and  making  a  deduction  for  depletion  and  depreciation  of  mineral  property  shall  keep 
accurate  ledger  accounts  in  which  shall  be  charged  the  fair  market  value  as  of  March  1, 
1913,  or  the  cost,  as  the  case  may  be,  (a)  of  the  property,  and  (b)  of  the  plant  and  equip¬ 
ment  together  with  such  amounts  expended  for  development  of  the  property  or  additions 
to  plant  and  equipment  since  that  date  as  have  not  been  deducted  as  expense  in  his  returns. 
These  accounts  shall  be  credited  with  the  amount  of  the  depreciation  and  depletion  de¬ 
ductions  claimed  and  allowed  each  year,  or  the  amount  of  the  depreciation  and  depletion 
shall  be  credited  to  depletion  and  depreciation  reserve  accounts,  to  the  end  that  when 
the  sum  of  the  credits  for  depletion  and  depreciation  equals  the  value  or  cost  of  the  prop¬ 
erty,  plus  the  amount  added  thereto  for  development  or  additional  plant  and  equipment, 
less  salvage  value  of  the  physical  property,  no  further  deduction  for  depletion  and  de¬ 
preciation  with  respect  to  the  property  will  be  allowed.  If  dividends  are  paid  out  of  a 
depletion  or  depreciation  reserve,  the  stockholders  must  be  expressly  notified  that  the 
dividend  is  a  return  of  capital  and  not  an  ordinary  dividend  out  of  profits. 

Art.  217.  Statement  to  be  attached  to  return  where  depletion  of  mine  claimed. — 

To  the  return  of  the  taxpayer  claiming  a  deduction  for  depletion  or  depreciation  or  both 


7 


there  should  be  attached  a  statement  setting  out:  (a)  whether  the  owner  is  a  fee  owner 
or  lessee  or  both;  (b)  a  description  of  the  property  owned  in  fee,  if  any,  and  a  description 
of  the  leasehold  property,  if  any,  including  the  date  of  acquisition  and  the  date  of  expira¬ 
tion  of  the  lease;  (c)  the  fair  market  value  as  of  March  1,  1913,  or  the  cost,  as  the  case 
may  be,  of  the  property  owned  in  fee  and  the  leasehold  property,  together  with  a  statement 
of  the  precise  method  by  which  the  value  or  the  cost  of  freehold  and  leasehold  property 
was  determined;  (d)  the  estimated  number  of  units  of  mineral  or  ore  at  the  date  of  acquisi¬ 
tion  or  of  valuation  in  the  property  owned  in  fee  and  in  the  leasehold  property  separately, 
together  with  an  explanation  of  the  method  used  in  estimating  in  each  case  the  number  of 
units  of  mineral  or  ore  for  purposes  of  depletion;  (e)  the  amount  of  capital  applicable  to 
each  unit;  (f)  the  number  of  units  removed  and  sold  during  the  year  for  which  the  return 
was  made;  (g)  the  total  amount  deducted  on  account  of  depletion  and  on  account  of 
depreciation  stated  separately  up  to  the  taxable  year  during  the  ownership  of  the  tax¬ 
payer,  and  (h)  any  other  data  which  would  be  helpful  in  determining  the  reasonableness 
of  the  depletion  and  depreciation  deductions  claimed  in  the  return. 

Art.  224.  Depreciation  of  improvements  in  the  case  of  mine. — It  shall  be  optional 
with  the  taxpayer,  subject  to  the  approval  of  the  Commissioner,  (a)  whether  the  cost 
or  value  of  the  mining  property,  including  ores  and  minerals,  plant  and  equipment,  and 
charges  and  additions  to  capital  account  not  charged  to  expense  and  deducted  as  expense 
on  the  returns  of  the  taxpayer,  shall  be  recovered  at  a  rate  established  by  current  exhaus¬ 
tion  of  mineral,  or  (b)  whether  the  cost  or  value  of  the  mineral  and  charges  to  capital 
account  of  expenditures  other  than  for  physical  property  shall  be  recovered  by  appro¬ 
priate  charges  based  on  depletion  and  the  cost  or  value  of  plant  and  equipment  shall  be 
recovered  by  reasonable  charges  for  depreciation  calculated  by  the  usual  rules  for  deprecia¬ 
tion  or  according  to  the  peculiar  conditions  of  the  taxpayer’s  case  by  a  method  satisfactory 
to  the  Commissioner.  Nothing  in  these  regulations  shall  be  interpreted  to  mean  that 
the  value  of  a  mining  plant  and  equipment  may  be  reduced  by  depreciation  or  depletion 
deductions  to  a  sum  below  the  value  of  the  salvage  when  the  peoperty  shall  have  become 
obsolete  or  shall  have  been  abandoned  for  the  purpose  of  mining,  or  that  any  part  of  the 
value  of  land  for  purposes  other  than  mining  may  be  recoverable  through  depletion  or 
depreciation. 


Obsolesence. 

In  addition  to  the  provisions  for  depreciation  and  depletion  to  replace  the  capital  sum  invested 
in  depreciable  property  and  charges  for  ordinary  working  expenses,  operating  account  should  be 
charged  with  the  residual  value  of  property  (after  deducting  depreciation,  which  has  been  or  should 
have  been  charged,  and  insurance)  that  may  be  destroyed  by  catastrophe;  also  operating  account 
should  be  charged  with  the  residual  value  over  accrued  depreciation  and  salvage  of  any  property 
discarded  or  that  has  become  useless  or  obsolete  before  the  end  of  the  natural  period  of  its  usefulness. 
This  is  authoritatively  emphasized  by  Articles  141,  142  and  143  in  Treasury  Regulations  No.  45. 

Art.  141.  Losses. — Losses  sustained  during  the  taxable  year  and  not  compensated 
for  by  insurance  or  otherwise  are  fully  deductible  (except  by  non-resident  aliens)  if  (a) 
incurred  in  the  taxpayer’s  trade  or  business,  or  (b)  incurred  in  any  transaction  entered 
into  for  profit,  or  (c)  arising  from  fires,  storms,  shipwreck  or  other  casualty,  or  from  theft. 
They  must  usually  be  evidenced  by  closed  and  completed  transactions.  In  the  case  of 
the  sale  of  assets  the  loss  will  be  the  difference  between  the  cost  thereof,  less  depreciation 
sustained  since  acquisition,  or  the  fair  market  value  as  of  March  1,  1913,  if  acquired  before 
that  date,  less  depreciation  since  sustained,  and  the  price  at  which  they  were  disposed  of. 


8 


When  the  loss  is  claimed  through  the  destruction  of  property  by  fire,  flood  or  other  casualty, 
the  amount  deductible  will  be  the  difference  between  the  cost  of  the  property  or  its  fair 
market  value  as  of  March  1,  1913,  and  the  salvage  value  thereof,  after  deducting  from  the 
cost  or  value  as  of  March  1,  1913,  the  amount,  if  any,  which  has  been  or  should  have  been 
set  aside  and  deducted  in  the  current  year  and  previous  years  from  gross  income  on  account 
of  depreciation  and  which  has  not  been  paid  out  in  making  good  the  depreciation  sustained. 
But  the  loss  should  be  reduced  by  the  amount  of  any  insurance  or  other  compensation 
received.  A  loss  in  the  sale  of  an  individual’s  residence  is  not  deductible.  Losses  in 
illegal  transactions  are  not  deductible. 

Art.  142.  Voluntary  removal  of  buildings. — Loss  due  to  the  voluntary  removal  or 
demolishing  of  old  buildings,  the  scrapping  of  old  machinery,  equipment,  etc.,  incident-  to 
renewals  and  replacements  will  be  deductible  from  gross  income  in  a  sum  representing  the 
difference  between  the  cost  of  such  property  demolished  or  scrapped  and  the  amount  of  a 
reasonable  allowance  for  the  depreciation  which  the  property  had  undergone  prior  to  its 
demolition  or  scrapping;  that  is  to  say,  the  deductible  loss  is  only  so  much  of  the  original 
cost  of  the  property,  less  salvage,  as  would  have  remained  unextinguished  had  a  reasonable 
allowance  been  charged  off  for  depreciation  during  each  year  prior  to  its  destruction. 
When  a  taxpayer  buys  real  estate  upon  which  is  located  a  building  which  he  proceeds  to 
raze  with  a  view  to  erecting  thereon  another  building,  it  will  be  considered  that  the  tax¬ 
payer  has  sustained  no  deductible  loss  by  reason  of  the  demolition  of  the  old  building,  and 
no  deductible  expense  on  account  of  the  cost  of  such  removal,  the  value  of  the  real  estate, 
exclusive  of  old  improvements,  being  presumably  equal  to  the  purchase  price  of  the  land 
and  building  plus  the  cost  of  removing  the  useless  building. 

Art.  143.  Loss  of  useful  value. — When  through  some  change  in  business  conditions 
the  usefulness  in  the  business  of  some  or  all  of  the  capital  assets  is  suddenly  terminated, 
so  that  the  taxpayer  discontinues  the  business  or  discards  such  assets  permanently  from 
use  in  the  business,  he  may  claim  as  a  loss  for  the  year  in  which  he  takes  such  action  the 
difference  between  the  cost  or  fair  market  value  as  of  March  1,  1913,  of  any  asset  so  dis¬ 
carded  (less  any  depreciation  allowances)  and  its  salvage  value  remaining.  This  exception 
to  the  rule  requiring  a  sale  or  other  disposition  of  property  in  order  to  establish  a  loss 
requires  proof  of  some  unforeseen  cause  by  reason  of  which  the  property  must  be  prema¬ 
turely  discarded,  as,  for  example,  where  machinery  or  other  property  must  be  replaced 
by  a  new  invention,  or  where  an  increase  in  the  cost  or  other  change  in  the  manufacture 
of  any  product  makes  it  necessary  to  abandon  such  manufacture,  to  which  special  ma¬ 
chinery  is  exclusively  devoted,  or  where  new  legislation  directly  or  indirectly  makes  the 
continued  profitable  use  of  the  property  impossible.  This  exception  does  not  extend  to  a 
case  where  the  useful  life  of  property  terminates  solely  as  a  result  of  those  gradual  processes 
for  which  depreciation  allowances  are  authorized.  It  does  not  apply  to  inventories  other 
than  capital  assets.  The  exception  applies  to  buildings  only  when  they  are  permanently 
abandoned  or  permanently  devoted  to  a  radically  different  use,  and  to  machinery  only 
when  its  use  as  such  is  permanently  abandoned.  Any  loss  to  be  deductible  under  this 
exception  must  be  charged  off  on  the  books  and  fully  explained  in  returns  of  income. 

Distinction  Between  Capital  and  Operating  Expenditure. 

The  drawing  of  distinctions  between  capital  and  operating  expenditures,  in  the  accounting 
involved  in  permanent  enterprises,  is  a  favorite  field  for  discussion  among  accountants,  but  in  the 
case  of  coal  mining  or  other  wasting  enterprises,  experience  teaches  that  the  field  for  discussion, 
if  indeed  there  be  any,  is  extremely  limited. 


9 


After  a  coal  mine  has  been  developed  and  equipped  to  its  contemplated  or  possible  capacity, 
it  is  a  constant  consumer  of  material  and  supplies  and  equipment,  which,  though  nominally  of  a 
durable  nature,  are  subject  to  destructive  wear  and  tear,  by  reason  of  the  uses  to  which  they  are 
put,  and  all  these  appliances  must  be  kept  in  repair  to  do  their  work  or  the  output  can  not  be  main¬ 
tained. 

Mules  and  pit  cars  are  constantly  worn  out,  and  have  to  be  replaced,  and  as  the  working 
faces  advance  with  the  exhaustion  of  the  coal,  the  length  of  haul,  and  consequent  time  of  circulation 
of  pit  cars  between  the  working  face  and  dump  increases,  more  motors,  mules  and  pit  cars  have  to 
be  supplied  to  maintain  the  output,  and  the  more  motors,  mules  and  pit  cars  in  the  mine,  the 
greater  expense  for  replacements  and  repairs. 

Also,  with  the  advance  of  workings,  more  rails  have  to  be  laid  and  more  copper  wire  or  other 
conductors  put  up  to  carry  power  to  the  working  faces  to  maintain  the  output.  They  remain  in 
place  until  the  mine  is  exhausted,  and  when  they  are  recovered  have  but  little  net  scrap  value. 
In  fact,  any  net  salvage  is  relatively  very  small. 

The  fact  that  these  expenses  are  continually  recurrent  and  practically  a  fixed  factor  in  the  cost 
of  production  per  ton  from  year  to  year,  proves  that  they  constitute  an  operating  rather  than  a 
capitalizable  expense. 

This  being  so,  it  makes  no  difference  to  taxable  income  whether  they  are  charged  immediately 
to  operating  expense  or  written  off  by  deductions  representing  depreciation  allowances  which  would 
have  to  be  readjusted  and  compounded  from  year  to  year.  As  a  practical  matter,  it  is  better  to 
dispose  of  such  expense  by  direct  charge  to  operating  expense  rather  than  taken  care  of  by  vexatious 
refinements  of  accounting,  that  would  be  necessary  if  these  items  be  capitalized  and  “depreciated.” 

That  this  proposition  is  now  acceptable  to  the  Department  is  substantiated  by : 

Art.  222.  Charges  to  capital  and  to  expense  in  the  case  of  mine. — In  the  case  of 
mining  operations  all  expenditures  for  plant,  equipment,  development,  rent  and  royalty 
prior  to  production,  and  thereafter  all  major  items  of  plant  and  equipment,  shall  be  charged 
to  capital  account  for  purposes  of  depletion  and  depreciation.  After  a  mine  has  been 
developed  and  equipped  to  its  normal  and  regular  output  capacity,  however,  the  cost  of 
additional  minor  items  of  equipment  and  plant,  including  mules,  motors,  mine  cars, 
trackage,  cables,  trolley  wire,  fans,  small  tools,  etc.,  necessary  to  maintain  the  normal 
output  because  of  increased  length  of  haul  or  depth  of  working  consequent  on  the  extrac¬ 
tion  of  mineral,  and  the  cost  of  replacements  of  these  and  similar  minor  items  of  worn-out 
and  discarded  plant  and  equipment,  may  be  charged  to  current  expense  of  operations, 
unless  the  taxpayer  elects  to  write  off  such  expenditures  through  charges  for  depreciation. 


Necessity  of  Detailed  Analysis. 

If  the  only  objects  of  an  Operator’s  periodical  statements  were  to  exhibit  the  financial  results 
of  the  period  covered,  or  to  contribute  to  general  statistics,  a  short  form  with  a  few  sub-totals  and 
their  extensions  would  be  all  required;  but  the  successful  solution  of  the  problems  facing  the  industry 
demands  intensive  management  and  economy,  and  as  intensive  management  means  careful  and 
intelligent  attention  to  detail,  analytical  accounting  is  necessary. 

The  operating  executive  should  have  a  report  from  each  mine,  which,  read  in  the  light  of  his 
knowledge  of  the  property,  will  be  a  comprehensive  narrative  of  what  has  been  done,  and  reflect 
the  physical  conditions  met  with  during  the  period  covered  by  the  report,  and  exhibit  a  clear  state¬ 
ment  of  the  cost  of  labor  and  material  expended,  classified  in  accordance  with  the  natural  subdi- 


10 


visions  of  the  work  that  has  to  be  done  in  and  about  a  mine,  so  that  the  economy  and  efficiency 
with  which  each  thing  has  been  done  can  be  critically  studied. 

In  the  majority  of  cases  the  natural  subdivisions  of  the  work  in  and  around  a  coal  mine  are  as 


follows : 

1. 

Mine  Office. 

2. 

Superintendence. 

3. 

Engineering. 

4. 

Mining. 

5. 

Timbering. 

6. 

Deadwork. 

7. 

Tracklaying. 

8. 

Drainage. 

9. 

Ventilation. 

10. 

Haulage  and  Hoisting. 

11. 

Dumping  and  Tallying. 

12. 

Preparation. 

13. 

Railroad  Car  Loading  and  Yard  Expense. 

14. 

Power. 

15. 

Repairs  to  Buildings  and  Permanent  Structures. 

16. 

Sundries. 

To  these  subdivisions  should  be  distributed  the  items  below: 

1.  MINE  OFFICE  EXPENSE. 

Clerks,  Bookkeepers,  Janitor,  Books  of  Account,  Stationery,  Office  Furniture  and  Supplies, 
Telephone,  Light  and  Heat,  etc.,  etc. 

2.  SUPERINTENDENCE. 

Wages  of  Superintendents,  Bosses,  Mine  Examiners,  Watchmen,  and  all  other  direction  and 
caring  for  the  property  in  a  supervisory  capacity.  Safety  Lamps,  Mine  Telephones,  etc.,  etc. 

3.  ENGINEERING. 

Mining  Engineer,  Helper,  Engineering  Instruments  and  Supplies,  Maps,  Blueprints,  etc.,  etc. 

4.  MINING. 

(a)  Hand  Mining. 

Miners,  Helpers,  Shot  Firers,  etc. 

(b)  Machine  Mining. 

In  machine  mines  this  item  should  be  subdivided  into  Undercutting  and  Pit  Car 
Loading. 

Undercutting  should  be  charged  with — 

(a)  Generation  and  Transmission  of  Power,  i.  e.,  the  proportionate  share  of  Cost  of 
power  generated  and  its  transmission  to  machines  (see  Note  on  Power  below). 

(b)  Maintenance  of  Machines,  i.  e.,  repair  parts,  machine  picks,  cable  for  electric  machine, 
and  air  hose  for  air  machines.  Shop  and  repair  men  employed  on  machines  and  labor  of 
blacksmiths  sharpening  or  making  bits  and  such  part  of  the  time  of  head  electrician  spent 
in  maintenance  of  machines. 

(c)  Operating  Machines:  To  this  subdivision  should  be  charged  the  wages  of  Machine 
Runners  and  Helpers,  Bit  Carriers,  oil,  grease  and  waste,  oil  cans,  hand  picks,  pick  handles, 
jacks,  machine  shovels,  etc.,  etc.  If  machines  are  not  equipped  with  self-propelling 


11 


trucks  and  the  machines  are  moved  about  their  territory  by  mule  haulage,  such  haulage 
should  be  charged  to  operating  machines. 

Pit  Car  Loading  needs  no  comment. 


5.  TIMBERING. 

Though  Timbering  is  imposed  by  physical  conditions  and  is  closely  incident  to  work  at  the 
face,  it  is  a  significant  item,  and  should  stand  by  itself.  To  this  subdivision  should  be  distributed 
wages  of  timbermen  and  helpers,  the  cost  of  props,  cap  pieces,  cross  bars  and  other  timber  used 
in  advancing  work,  such  cost  including  freight  and  the  cost  of  unloading  and  handling  at  the  mine, 
with  the  expense  of  preparing  and  delivering  to  the  working  face. 

6.  DEADWORK. 

As  every  mine  presents  physical  conditions  peculiar  to  itself,  no  two  mines  being  alike,  and  as 
the  physical  conditions  fluctuate  as  the  work  progresses,  in  order  to  work  out  comparable  statements 
and  records,  Deadwork  should  be  classified  in  accordance  with  its  nature,  such  as  yardage,  premium 
for  narrow  work,  shooting  rock,  lifting  bottom,  taking  down  top,  stowing  and  dumping  gob,  cleaning 
up  falls  and  retimbering  after  them,  handling  squeezes,  mine  fires,  or  any  other  work  imposed 
by  adverse  physical  conditions. 

7.  TRACKLAYING. 

While  track  is  immediately  connected  with  and  necessary  for  the  transportation  of  coal  to  the 
shaft  bottom,  and  hence  a  necessary  item  incident  to  Haulage,  it  has  long  been  regarded  as  a  signifi¬ 
cant  item  in  the  cost  sheet,  and  should  stand  by  itself. 

To  this  account  should  be  charged  rails,  ties,  spikes  and  fastenings,  and  the  labor  of  grading 
roads  and  tracklaying  in  advancing  work.  Repairs  to  track  should  be  charged  to  Haulage  and 
Hoisting  under  Maintenance  of  Way. 

Purchases  of  track  material  should  be  charged  to  Track  Material  Account,  and  as  the  material 
is  taken  into  the  mine  it  should  be  credited  and  charged  Tracklaying. 

8.  DRAINAGE. 

To  this  subdivision  should  be  charged  the  cost  of  labor  employed  in  connection  with  the 
ordinary  removal  of  water  from  the  workings  of  the  mine,  with  the  expense  of  repairs  and  mainte¬ 
nance  of  pumps,  pipe  lines,  drains;  also  the  proper  proportion  of  power  used.  In  some  regions  and 
in  deep  mines  the  tonnage  of  water  handled  and  consequent  consumption  of  power  is  very  heavy. 

In  the  event  of  a  flood  or  extraordinary  inflow  of  water,  the  expense  of  recovering  the  mine  or 
flooded  workings  should  be  shown  as  a  special  and  separate  charge  to  Operating  Account. 

9.  VENTILATION. 

To  ventilation  should  be  charged  proper  proportion  of  Power  Expense  to  represent  power 
used  in  driving  fans.  If  cross-cuts  are  driven  narrow  because  of  physical  conditions,  the  yardage 
should  be  charged  under  Deadwork. 

Labor  and  material  used  in  closing  cross-cuts,  constructing  overcasts,  mine  doors,  curtains 
and  brattice,  should  be  charged  to  Ventilation;  also  expense  of  cleaning  and  repairing  air  courses. 
Repairs  and  lubrication  of  fan  and  fan  engine,  pressure  gauges,  etc.,  etc.,  should  be  charged  to 
Ventilation. 

While  trappers  are  rendered  necessary  in  connection  with  ventilation  doors,  their  work  is 
incident  to  haulage  of  coal,  and  their  wages  should  be  charged  to  Hauling  and  Hoisting  under 
Conducting  Transportation. 


12 


10.  HAULAGE  AND  HOISTING  should  be  separated  into — 

1.  Generation  and  Transmission  of  Power. 

The  proportion  of  expense  of  generating  power  (as  set  forth  in  note)  and  the  construction 
and  keeping  up  of  transmission  lines  and  haulage  circuits. 

2.  Care  and  Maintenance  of  Equipment. 

(a)  Hoisting  and  haulage  engine  repair  parts,  lubricants,  packing  and  waste,  and  wages 
of  hoisting  engineer  and  mechanics  employed  in  care  and  repair.  Hoisting  and  haulage 
ropes,  cage  repairs,  and  replacements;  safety  devices,  guides  and  sheaves. 

(b)  Care  and  maintenance  of  motors. 

When  motor  haulage  is  used,  repair  parts  and  labor  of  care  and  repair. 

(c)  Care  and  maintenance  of  pit  cars. 

Labor  and  material  used  in  keeping  pit  cars  in  repair.  New  cars  replacing  wrecked 
or  worn-out  cars,  also  additional  cars  necessary  to  maintain  output  by  reason  of  increasing 
length  of  haul  after  mine  has  reached  its  contemplated  output  capacity. 

(d)  Care  and  maintenance  of  live  stock. 

Harness  and  stable  supplies. 

Grain  and  hay,  and  wages  of  stablemen  and  veterinary,  clipping  and  shoeing,  etc. 
New  mules  replacing  killed  or  worn-out  mules  should  be  charged  to  maintenance  of  live 
stock. 

3.  Conducting  Transportation. 

Drivers,  Boss  Drivers,  Motormen,  Trip  Riders,  Couplers,  Cagers  and  Pushers,  Oilers 
(oil  and  grease)  Trappers  and  Switch  Throwers,  Jackmen,  and  that  part  of  Hoisting  Engineer’s 
wages  not  charged  to  Maintenance  and  Repairs. 

4.  Maintenance  of  Way. 

Repairs  to  roads,  cleaning  roads,  relaying  track,  new  ties,  rollers  for  rope  haulage,  etc.,  etc. 

11.  DUMPING  AND  TALLYING. 

Top  Cagers,  Pushers  and  Dumpers,  Weigh  Boss,  Check  Puller  and  Track  Weighman. 

12.  PREPARATION. 

The  proportion  of  power  used  in  operating  screens,  crushers,  elevators,  conveyors,  picking 
tables,  spiralizers,  loading  booms,  etc.,  and  the  cost  of  the  labor  of  attendants  thereon,  such  as 
Inspectors,  Dock  Bosses,  Sulphur  and  Slate  Pickers,  and  the  labor  of  disposing  of  waste,  all  material 
and  labor  involved  in  the  maintenance  of  repairs  and  replacements  of  such  apparatus  as  are  used  in 
the  preparation  of  coal. 

If  a  Washer  is  operated,  such  investment  and  its  operation  should  stand  by  itself.  The  Washer 
should  be  charged  with  the  expense  of  operation,  repairs,  maintenance,  insurance  and  its  proper 
depreciation,  with  the  value  of  the  raw  coal  passed  through  it,  either  at  cost  of  production,  or, 
preferably,  at  the  market  value  obtainable  for  raw  coal,  and  credited  with  the  out-turn  of  washed 
product. 

If  the  result  is  a  credit  balance,  it  should  be  taken  into  operating  income  as  net  income  from 
Washer;  if  it  results  in  a  debit  balance,  it  should  be  deducted  from  operating  income  as  loss  on 
Washer  operations. 


13 


13.  RAILROAD  CAR  LOADING  AND  YARD  EXPENSE. 

To  this  subdivision  should  be  charged:  Wages  of  Yard  Boss,  Car  Cleaners,  Trimmers,  Car 
Riders,  Car  Haulers,  Brakemen,  and  all  material  and  supplies  used  by  them. 

The  expense  of  maintaining  and  operating  mine  tracks,  if  a  switch  engine  is  employed,  or  if 
switching  is  done  by  the  railroad  for  which  a  special  charge  is  made,  distinct  from  the  freight  rate, 
the  expense  thereof  should  be  charged  to  this  subdivision. 

14.  POWER. 

The  generation  and  transmission  of  power  is  about  the  only  expense  about  a  coal  mine  that 
is  not  in  total  directly  chargeable  to  some  one  subdivision  of  operating  work.  To  generation  and 
transmission  of  power  should  be  charged  the  wages  of  Firemen,  Fuel  Men,  Ash  Haulers,  Water  Men, 
Pump  Men,  Generator  and  Compressor  Attendants,  and  such  part  of  Hoisting  Engineer’s  and 
Electrician’s  time,  or  other  labor  and  material,  as  may  be  employed  in  the  care,  repair  and  main¬ 
tenance  of  boilers,  pumps,  engines,  generators,  air  compressors  or  other  power- generating  ma¬ 
chinery;  wire  and  pipe  used  in  transmission  lines,  cost  of  water  supply  and  all  coal  consumed, 
preferably  at  its  market  value.  The  cost  of  coal  to  the  operator  for  his  own  consumption  is  what  he 
could  get  for  it  in  the  market.  If  an  unmerchantable  product  is  used  under  the  boilers,  it  should 
be  charged  at  its  cost  of  production.  If  cost  of  fuel  is  not  included  in  cost  of  power,  the  accounts 
do  not  exhibit  true  cost.  The  true  cost  should  be  before  the  operator  to  induce  him  to  estimate  the 
possibilities  of  effecting  savings  by  improving  his  plant  or  boiler  room  practice;  also  to  estimate  the 
possibility  of  effecting  economy  by  purchasing  power  of  outside  service  companies,  or  through 
establishing  central  power  plants.  The  tonnage  consumed  per  annum  under  own  boilers  by  large 
producers  is  very  large,  and  the  cost  thereof  should  be  clearly  shown. 

If  outside  power  is  purchased,  it  should  be  charged  to  Power. 

The  expense  of  power  should  then  be  distributed  to  the  different  subdivisions  of  Operating 
Expense,  in  accordance  with  the  proportion  of  power  employed  in  each  section  of  the  work. 

Mining,  under  the  subdivision  Undercutting,  should  be  charged  with  the  proportion  of  power 
applied  to  machine  operation. 

Haulage  and  Hoisting  should  be  charged  under  Generation  and  Transmission  of  Power,  with 
its  proportion  of  power-house  expense,  as  represents  the  power  used  by  hoisting  engines  and  haulage 
engines  and  motors. 

Under  the  subdivision  Preparation  should  be  charged  the  power  used  for  shaker  screens, 
picking  tables,  etc.,  etc. 

Ventilation  should  be  charged  with  the  share  of  expense  of  power  house,  in  accordance  with 
the  power  used  for  driving  fans. 

Drainage,  with  the  proper  proportion  of  power  used  in  pumping  water  from  the  mine. 

The  above  suggestion  that  the  expense  of  power  should  be  distributed  to  the  various  subdivi¬ 
sions  of  the  work  may  appear  difficult  to  the  accountant,  and  in  small  operations  such  distribution 
may  be  a  needless  refinement;  and  in  such  cases  power  may  well  be  shown  as  an  undistributed 
item  of  operating  expense. 

However,  in  large  operations,  the  cost  of  power  is  a  large  item,  and  the  making  up  of  a  heat 
and  steam  balance  will  not  be  difficult  to  the  well-informed  engineer  or  electrician. 

The  measurement  of  fuel  and  water  and  steam  generation,  compared  with  the  useful  work 
being  done,  will  prove  fruitful  in  results.  Such  time  and  effort  is  well  spent,  as  it  leads  up  to  the 
detection  of  steam  line  leakages,  engine  cylinders  and  valves  in  bad  condition,  insufficient  power 
circuits,  bad  track  bonding,  etc.,  etc.  The  coal  operator  who  wastes  coal  by  overlooking  prevent¬ 
able  losses  is  like  the  merchant  who  consumes  his  own  stock. 

David  Moffat  Myers,  in  his  very  lucid  and  valuable  book  entitled  “Preventing  Losses  in 
Factory  Power  Plants,”  well  says:  “Just  as  the  expert  accountant  is  able  to  analyze  the  expenditure 
of  one  hundred  dollars  in  a  business  enterprise  and  to  show  where  some  of  them  are  wasted  or  mis- 


14 


spent,  and  finally  to  strike  a  true  balance  between  income  and  expenditure,  just  as  truly  and  with 
as  great  a  degree  of  accuracy  a  trained  engineer  may  analyze  and  balance  the  expenditure  of  energy 
from  the  original  one  hundred  per  cent  income  or  input,  to  the  final  machine  horsepower  hours  of 
useful  work,  and  in  so  doing  he  may  point  out  where  certain  portions  of  this  energy  are  misspent  or 
wasted,  and  how  they  may  be  saved  and  converted  into  useful  work.” 

“There  does  not  exist  a  power  problem  that  is  not  capable  of  solution  by  the  intelligent  applica¬ 
tion  of  these  principles  of  analysis.” 

15.  REPAIRS  TO  BUILDINGS  AND  STRUCTURES. 

To  this  item  should  be  charged  labor  and  material  used  in  repairs  of  permanent  buildings  and 
structures  of  the  surface  mining  plant. 


16.  SUNDRIES. 


Small  and  unimportant  items  of  expense  not  easily  distributable  to  the  above  subdivisions  of 
Expense. 


NECESSITY  OF  CONTINGENT  RESERVE. 


In  the  case  of  permanent  enterprises,  the  funds  derived  from  charges  to  operating  cost  to 
cover  depreciation  and  depletion  are  to  replace  plant  and  equipment  becoming  worn  out  or  obsolete; 
but  in  coal  mining  or  other  wasting  enterprises,  the  purpose  of  such  fund  is  to  replace  and  redeem 
the  capital  invested  in  the  wasting  assets,  and  such  duty  of  redemption  fully  taxes  the  allowable 
charges  for  depletion  and  depreciation. 

As  a  general  rule,  the  buildings  and  major  items  of  plant  and  equipment  placed  at  a  coal  mine 
are  calculated  to  last,  and,  with  proper  care  and  repair,  do  last  the  life  of  the  mine,  and  therefore 
obsolescence  of  coal  mine  plant  and  equipment  results  more  often  from  accident  than  by  installation 
of  new  appliances.  Depletion  and  depreciation  are  items  of  prime  cost  that  can  be  measured  with 
reasonable  exactness  and  properly  provided  for  by  charges  to  current  expense  of  operation;  but 
coal  mining  is  a  hazardous  business,  and  in  some  regions  extra  hazardous,  and  obsolescence  being 
a  contingency,  common  prudence  dictates,  in  order  to  avoid  possible  financial  embarrassment,  that 
there  should  be  periodically  reserved  and  built  up  from  net  income  sufficient  provision  to  meet 
any  probable  contingency.  Such  reserve  is  not  an  item  of  current  cost,  and  therefore  not  deductible 
in  determining  taxable  income,  but  the  cost  upon  the  realization  of  the  contingency  is  a  proper 
charge  to  current  expense,  and  should  then  be  so  charged,  and  not  charged  to  contingent  reserve. 

The  increase  in  current  expense,  by  reason  of  such  happening,  will  reduce  current  net  income, 
and  therefore  a  corresponding  amount,  or  as  much  thereof  as  may  be  possible,  should  be  transferred 
from  contingent  reserve  to  Profit  and  Loss. 

The  general  conditions  existing,  and  the  experience  of  any  mine  or  mining  region,  will  dictate 
to  the  operator  the  necessary  provision  for  contingencies. 

Though  maintenance  expense  is  practically  a  constant  factor  of  current  expense  in  coal  mining, 
prudence  also  suggests  in  accordance  with  the  peculiarities  of  each  case  the  segregation  from  income 
of  a  maintenance  reserve. 

BALANCE  SHEET. 

The  balance  sheet  should  show  the  exact  details  of  the  financial  condition  of  the  business  and 
be,  at  the  same  time,  an  historical  narrative  of  the  enterprise. 

The  value  of  the  balance  sheet  will  be  in  exact  measure  of  the  time  spent  on  its  production  and 
consideration.  The  more  put  into  a  balance  sheet,  the  more  can  be  gotten  out  of  it. 

A  suggestion  as  to  a  pro  forma  balance  sheet  is  submitted  herewith,  which  each  operator  can 
well  build  on  in  accordance  with  the  peculiarities  of  his  particular  case. 


15 


ASSETS 

Coal  Mining  Property 

An  account  with  each  mine  showing  surface  lands,  coal 
owned  in  fee  or  leaseholds,  plant  buildings,  power  plant, 
miscellaneous  equipment . . . . 

Less  Depreciation . . 

Material  and  Supplies  Accounts 

An  account  with  each  mine  showing  the  various  stocks, 
such  as  mine  timber,  track  material,  machinery  repair 
parts,  etc.,  etc _ _ _ 

Other  Mining  Property 

Lands,  houses,  store  buildings,  connected  with  above 
property  but  not  actually  employed  in  mining  coal _ 

Less  Depreciation _ 

Other  Real  Estate 

Real  estate  and  improvements  thereon,  owned  but  not 
connected  with  mining  property,  less  Depreciation  of 
Improvements _ 

Undeveloped  Coal  Lands 

Coal  owned,  or  leaseholds  not  practically  workable 
through  existing  development,  to  be  developed  by 
future  openings _ 

Other  Investments 

Stocks,  Bonds,  etc - 

Deferred  Charges 

Insurance  premiums  or  other  advances  account  of  opera¬ 
tion,  properly  extinguishable  by  ensuing  charges  to 
operating  expense;  also  discounts  on  bonds  or  securities 
sold,  properly  extinguishable  by  periodical  charges _ 

Advances 

Advances  to  subsidiaries  and  others  of  a  temporary 
nature  pending  disposition  or  settlement _ 

Accounts  and  Bills  Receivable — Slow 

Due  from  trade  customers,  representing  accounts  or 
notes  under  extension  or  for  any  other  reason  not  im¬ 
mediately  available _ _ _ _ 

Accounts  and  Bills  Receivable — Current 

Available  in  due  course  of  maturity  for  customers’  and 
other  accounts. _ _ _ 

Cash  on  Hand — 

Balances  in  banks  and  in  offices _ _ _ 


16 


LIABILITIES 

Bonds  or  Mortgages 

Classified  in  accordance  with  terms  of  issue,  whether 
direct  or  assumed  obligations . . . 

Deferred  Liabilities 

Accrued  interest,  taxes,  employers’  liability,  etc.,  etc... 

Depreciation  and  Depletion 

In  account  for  each  mine,  accumulated  by  periodical 
charges  to  the  operating  account  of  each  mine  and 
credited  hereto,  which  will  show  as  credits  on  trial  bal¬ 
ances,  but  show  in  final  balance  sheet  deducted  from 
cost  of  property _ 

Notes  Payable 

Classified  as  to  holders:  Banks,  officers  or  stockholders, 
or  others,  for  borrowed  money;  or  given  to  trade 
creditors _ 

Accounts  Payable 

Open  Accounts  classified  as  to  their  nature _ _ 

Vouchers  Payable 

Audited  vouchers  payable  on  account  of  regular  opera¬ 
tions _ 

Pay  Rolls 

Wages  accrued  and  unpaid  to  date  of  balance  sheet _ 

Capital  Stock 

Classified . . . . . . . . 

Surplus 

Earned  or  paid  in,  carried  to  permanent  surplus  because 
invested  in  permanent  assets _ 

Reserve  Funds 

Various  voluntary  reserves  set  aside  from  earnings  not 
allowable  deductions  from  taxable  income _ 

Undivided  Profits 

The  earnings  available  for  distribution  as  dividends _ 

(The  total  of  the  above  accounts  covering  capital  stock, 
surplus,  reserve  funds  and  undivided  profits  will  be  the 
basis  for  calculation  of  invested  capital  for  the  current 
year.) 

Income  Account 

Earnings  for  the  current  year. _ _ _ _ 


17 


DETERMINING  INVESTED  CAPITAL. 

The  value  of  mining  property,  representing  the  capital  sum  recoverable  through  charges  for 
depreciation  under  the  Income  Tax  sections  of  the  law,  seldom,  if  ever,  coincides  as  an  exact  factor 
in  determining  invested  capital  within  the  intent  and  meaning  of  the  sections  of  the  law  covering 
Excess  Profit  and  War  Taxes. 

The  langugage  of  the  Statute  of  1917  and  the  Regulations  thereunder  were  confusing,  but  the 
1918  Act  and  its  Regulations  do  much  to  guide  us  to  a  starting  point  in  determining  invested  capital. 

The  popular  opinion  held  at  the  passage  of  the  1917  Act — that  invested  capital  meant  net 
worth — was  natural ;  because  if  all  accounting  were  strictly  correct,  net  worth,  or  the  total  of  capital 
stock,  surplus  and  undivided  profits,  would  coincide  with  invested  capital. 

The  Revenue  Laws  of  1913  and  1916,  and  Regulations  thereunder,  set  up  the  rule  that  the  fair 
market  value  of  mineral  deposits  should  be  the  salable  value  thereof  en  bloc  as  of  March  1,  1913, 
or  at  the  date  of  acquisition  subsequent  thereto,  without  regard  to  the  equipment  and  development 
connected  therewith — obviously  an  unworkable  and  impossible  rule. 

It  has  been  pointed  out  that  a  developed  and  equipped  mine  composed  of  various  elements  has, 
if  the  enterprise  be  well-advised,  a  value  greater  than  the  sum  of  the  costs  of  its  elements.  Though 
this  value  is  positive,  it  is  impossible  to  define  its  nature  in  words. 

It  is  not  probable  that  many  operators  followed  the  Regulations  as  to  setting  up  new  book 
values  for  mining  property.  The  tax  rate  was  low,  and  the  Government  well  knew  that  very  few, 
if  any,  were  claiming  full  depreciation  as  a  deduction  in  tax  returns,  and  therefore  there  was  no 
loss  to  the  revenue. 

With  the  enactment  of  the  1917  Law,  however,  it  became  necessary  to  define  invested  capital, 
and  the  omission  in  the  past  to  rectify  book  values  became  an  immediate  and  definite  source  of 
embarrassment  and  confusion  to  both  taxpayer  and  the  Department;  and  many  tax  cases  are  now 
pending  adjustment,  and  definite  and  final  returns  under  the  1918  Law,  in  such  cases,  can  not  be 
made  until  these  adjustments  are  closed. 

In  the  Regulations  so  far  issued  under  the  1918  Law,  there  are  eight  articles,  numbered  811 
to  818,  relative  to  Section  325  of  the  Act;  and  forty-one,  numbered  from  831  to  871,  with  regard  to 
Section  326,  dealing  from  various  angles  with  the  matter  of  establishing  rules  for  determining 
invested  capital,  and  these  articles  contain  many  cross-references.  Hence,  it  will  be  appreciated 
that  it  is  quite  impossible  to  deal  with  so  complex  a  matter  within  the  scope  of  this  report,  but  from 
accounting  and  economic  viewpoints,  the  determining  of  actual  invested  capital  in  the  coal  industry 
is  a  matter  of  great  importance,  and  its  extended  treatment  should  be  made  the  subject-matter  of 
a  subsequent  report. 

It  may  be  stated  off-hand  that  the  general  rule  is  to  start  with  the  total  of  capital  stock,  surplus 
and  undivided  profits  and  reserves  that  are  not  allowable  deductions  in  arriving  at  taxable  income, 
and  then  proceed  to  test  this  result  by  scrutiny  of  the  integrity  of  the  book  values  of  the  assets, 
and  in  testing  the  integrity  of  the  book  values  of  depreciating  assets,  the  rule  is  to  take  the  value  of 
such  property  at  the  time  acquired  by  the  present  owner,  to  make  such  additions  thereto  as  are 
permitted  by  the  Statute*  and  to  deduct  therefrom  proper  depletion,  depreciation  and  obsolescence; 
thus  a  study  of  the  Regulations  makes  it  plain  that  adequate  deduction  for  depreciation  is  now 
compulsory  in  determining  invested  capital. 

BOOKKEEPING. 

In  the  foregoing,  the  principles  of  accounting  have  been  touched  upon,  and  it  is  unnecessary  to 
write  a  treatise  on  bookkeeping,  but  it  may  be  useful  to  refer  to  the  main  books  required  and  to  com¬ 
ment  upon  the  action  of  the  various  operating  accounts. 

The  principal  books  of  account  are: 

General  Ledger,  Cash  Book,  Journal,  Voucher  Register,  Sales  Register,  Coal  Customers’  Ledger. 

The  Ledger,  Cash  Book  and  Journal  need  no  comment. 

VOUCHER  REGISTER 

To  avoid  a  multiplicity  of  ledger  accounts  with  miscellaneous  creditors  from  whom  material 
and  supplies  are  purchased,  the  adoption  of  the  voucher  system  is  recommended.  The  Voucher 


18 


Register  appropriately  ruled,  both  horizontally  and  perpendicularly  to  allow  the  entry  of  number, 
name  of  payee,  what  for,  date  paid,  and  the  distribution  under  the  different  headings  of  the  amount 
thereof  to  the  account  or  accounts  to  which  the  items  covered  by  the  voucher  are  chargeable.  At 
the  end  of  each  month  the  total  footing  should  be  credited  to  Vouchers  Payable,  and  the  footings 
of  the  various  distribution  columns  charged  to  the  respective  accounts.  Some  accountants  post 
to  the  General  Ledger  direct  from  the  Voucher  Register,  but  we  recommend  a  journal  entry  and 
posting  from  the  journal. 

Every  cash  disbursement  should  be  represented  by  a  voucher  and  charged  on  the  Cash  Book 
to  Vouchers  Payable,  with  entry  of  the  number  of  the  voucher  and  name  of  the  payee. 

Payments  should  be  checked  from  the  Cash  Book  into  the  When  Paid  column  of  the  Voucher 
Register;  thus  the  controlling  account  in  the  General  Ledger  covering  miscellaneous  creditors 
will  be  Vouchers  Payable,  and  the  General  Ledger  balance  of  this  account  will  agree  with  the 
total  of  an  abstract  of  unpaid  vouchers  drawn  from  the  Voucher  Register. 

SALES  REGISTER 

In  cases  where  coal  is  consigned  through  from  the  mine,  a  convenient  form  of  Sales  Register 
page  is  a  manifest  of  billing  with  columns  on  the  right-hand  side,  for  the  entry  at  General  Office  of 
price  and  extension  of  amount,  these  pages  to  be  carried  in  a  loose-leaf  binder  until  the  end  of  the 
year,  when  they  should  be  permanently  bound. 

The  amount  of  each  invoice  should  be  posted  from  the  sales  sheet  to  the  debit  of  the  customer’s 
account  in  the  Coal  Customers’  Ledger.  At  the  end  of  the  month  the  total  should  be  taken  up  in 
a  journal  entry,  Charging  Coal  Customers  and  crediting  the  coal  sales  account  of  the  mine  from 
which  the  coal  is  shipped. 

As  payments  are  received  from  coal  customers,  they  should  be  credited  to  Coal  Customers  in  the 
Cash  Book.  Names  with  the  amounts  paid  by  each  customer  entered  in  “Short.”  From  the  Cash 
Book  should  be  posted  the  “Shorts”  to  the  individual  accounts  in  the  coal  customers  Ledger; 
thus  the  controlling  account  in  the  General  Ledger  representing  amounts  due  from  coal  customers 
will  be  Coal  Customers,  and  the  total  balance  of  individual  accounts  in  the  Coal  Customers’ 
Ledger  will  support  the  balance  in  the  General  Ledger. 


REVENUE  ACCOUNTS. 


COAL  SALES 

A  Coal  Sales  account  with  each  mine  to  be  credited  with  the  invoice  value  of  coal  sales,  as  per 
Sales  Register.  To  this  account  should  be  charged  any  freights  prepaid  and  included  in  the  invoice 
price,  and  any  allowances  and  adjustments,  and  this  account  closed  out  monthly  to  the  credit  of 
Operating  Account  of  the  mine  from  which  the  coal  is  shipped. 


RENT  OF  DWELLINGS 

Credited  with  rents  received. 

Charged  with  the  care,  painting  and  repairs,  taxes,  insurance  and  depreciation. 

Closed  out  monthly  to  the  credit  of  Operating  Account  for  the  mine  to  which  the  houses  belong. 

FARMING  OPERATIONS 

Credit  with  the  value  of  crops,  timber  cut,  rents,  if  rented,  etc. 

Charge  with  labor  and  supplies,  repairs  to  machinery  and  buildings,  small  implements,  fertilizer, 
etc.,  etc.,  taxes,  insurance  and  depreciation. 

If  the  farm  property  is  identified  with  a  particular  mine,  close  out  to  the  credit  of  the  Operating 
Account  of  said  mine;  or  if  not  identified  with  a  particular  mine,  close  out  to  income  account. 

WASHER  OPERATING  ACCOUNT 

Credit  with  the  proceeds  of  washed  coal. 

Charge  with  the  value  of  raw  coal  sent  to  the  washer,  labor  and  supplies,  repairs  to  buildings 
and  machinery,  Small  tools,  water  supply  expense,  taxes,  insurance  and  depreciation. 

If  identified  with  a  particular  mine,  close  out  each  month  to  debit  or  credit  of  Operating 
Account  of  said  mine.  If  a  Central  Washer  plant,  close  out  to  Income  Account. 


19 


COKE  PLANT  OPERATIONS 

Credit  with  proceeds  of  coke  sold. 

Charge  with  value  of  raw  coal  sent  to  coke  plant,  labor  in  and  about  plant,  repairs,  material 
and  supplies,  small  tools,  taxes,  insurance  on,  and  depreciation  of  buildings. 

If  identified  with  a  particular  mine,  close  out  to  Operating  Account  of  said  mine.  If  a  central 
plant,  close  out  to  Income  Account. 

MERCANTILE  OPERATIONS 

If  the  store  is  identified  with  a  particular  mine,  results  of  the  store  business  should  be  closed 
out  to  the  Income  Account  of  such  mine.  If  not  identified  with  a  particular  mine,  the  results  of  the 
store  business  should  be  carried  to  Income  Account. 

EXPENSE  ACCOUNTS. 

GENERAL  EXPENSE 

Charge  with  the  salaries  and  expenses  of  officers;  directors’  fees,  legal  expense,  general  office 
rent,  books,  stationery,  telephone  and  telegraph;  all  other  expenses  of  administration  and  main¬ 
taining  corporate  existence. 

Close  out  by  charging  to  the  Operating  Account  of  each  mine  with  such  mine’s  just  proportion. 
This  is  generally  prorated  in  accordance  with  the  tonnage  furnished  by  each  mine. 

SELLING  EXPENSE 

All  expenses  connected  with  the  promotion  and  making  of  coal  sales;  advertising;  salesmen’s 
salaries  and  expenses;  such  proportion  of  general  officers’  salaries  as  are  dedicated  to  the  selling 
department;  books;  stationery;  printing;  postage;  telephone  and  telegraph;  office  rent;  billing 
and  collecting  of  coal  customers’  accounts. 

Close  out  by  charging  to  the  Operating  Account  of  each  mine  its  proper  proportion,  usually 
based  on  tonnage  derived  from  each  mine. 

MATERIAL  AND  SUPPLIES 

Vouchers  covering  purchases  of  Material  and  Supplies  immediately  used  may  be  distributed 
direct  to  the  debit  of  operating  expense,  but  appropriate  Material  and  Supplies  Accounts  should  be 
kept  of  such  materials  as  are  carried  in  stock.  For  example,  in  many  localities  the  purchase  of  props, 
cross  bars  and  caps  depends  upon  the  season  of  the  year  and  not  in  accordance  with  current  con¬ 
sumption,  and  in  such  cases  a  Mine  Timber  Account  should  be  opened,  to  which  should  be  charged 
the  cost  of  timber,  including  freight  and  the  cost  of  unloading  and  handling  at  the  mine.  As  the 
timber  is  taken  below  it  should  be  credited  to  Timber  Account  and  charged  to  Operating  Expense, 
with  the  expense  of  preparing  and  delivering  to  the  working  face  under  the  subdivision  “Timbering.” 

The  purchase  of  rails,  fastenings,  spikes  and  ties  for  track  laying  is  always  in  anticipation  of 
future  requirements,  and  a  Track  Material  Account  should  be  opened,  to  which  the  cost  of  all  such 
material  should  be  charged,  and  as  such  material  is  taken  below  it  should  be  credited  to  Track 
Material  Account  and  charged  to  Operating  Expense  under  the  subdivision  “Track  Laying.” 

The  same  may  be  suggested  as  to  Mining  Machine  Repair  Parts,  but  in  operations  where  five 
or  more  mining  machines  are  used,  it  will  be  found  that  there  is  little  variation  in  the  expense  per  ton 
for  Machine  Supplies  from  month  to  month,  and  so  far  as  the  general  accounts  are  concerned, 
unless  large  stocks  are  carried,  it  will  be  proper  to  charge  such  supplies  direct  to  Operating  Expense, 
and  adjust  at  the  end  of  the  year  by  comparison  of  the  inventory  at  the  beginning  and  end  of  the 
year. 

MINE  OPERATING  EXPENSE 

An  account  with  each  mine  to  which  will  be  charged  all  expenses  for  labor  and  material  used  in 
and  about  the  mine,  classified  in  accordance  with  the  different  accounts  of  work  done,  as  hereinbefore 
recommended. 

Close  out  by  charging  to  Operating  Account  of  the  same  mine. 

OPERATING  ACCOUNT 

An  account  with  each  mine  to  which  will  be  credited  the  net  realization  of  coal  at  the  mine; 
other  income  belonging  to  such  property. 


20 


Charge  proportion  of  general  expense;  proportion  of  selling  expense;  transfer  of  operating 
expense;  royalties;  depreciation  and  depletion;  general  insurance,  liability  or  compensation 
insurance;  taxes,  excluding  income  and  war  taxes. 

Close  out  by  transferring  to  Income  Account. 

INCOME  ACCOUNT 

To  be  credited  or  charged  with  balance  of  Operating  Account  of  each  mine,  results  of  coke 
plant;  results  of  washer  operation;  interest  received  or  accrued;  all  other  income  received  or 
accrued. 

Charged  with  contingent  reserve;  maintenance  reserve;  or  other  reserves;  income  and  excess 
profits  taxes;  interest  paid  or  accrued. 

Close  out  to  Profit  and  Loss  at  end  of  the  year. 

PROFIT  AND  LOSS 

Credited  or  charged  at  end  of  year  with  transfer  of  balance  of  Income  Account. 

Charged  with  dividends  paid. 

Balance  of  this  account  to  rest  as  profits  applicable  to  dividends. 

Chargeable  with  the  transfer  of  such  amount  as  it  is  desired  to  transfer  to  permanent  surplus. 

SUGGESTIONS  AS  TO  PRICE-MAKING. 

The  demand  for  fuel  fluctuates  with  industrial  activity  and  seasonal  temperatures ;  such  demand 
whether  large  or  small,  is  at  all  times  imperative.  Demand  for  coal  is  not  decreased  by  high  prices 
nor  increased  by  low  prices. 

It  is  a  condition  of  the  bituminous  coal  business  that  more  coal  is  demanded  in  Fall  and  Winter 
than  during  Spring  and  Summer;  the  Operator  has  to  stand  by  during  the  dull  season;  he  should 
figure  this  expense  a  part  of  his  cost  of  production  to  be  recovered  from  the  consumer  as  compensa¬ 
tion  for  his  readiness  to  serve. 

During  the  active  season,  failure  of  car  supply,  accidents  and  breakdowns  are  additional  cause 
of  idle  time,  yet  these  idle  days  are  attended  with  expense  which  has  to  be  absorbed  by  the  revenue 
of  the  days  the  mine  works. 

The  expense  of  the  probable  number  of  idle  days  should  be  estimated  and  taken  into  considera¬ 
tion  in  making  a  base  price  for  coal  to  be  produced. 

Many  Operators  have  gone  broke  trying  to  “kill”  the  idle  days  by  cutting  prices. 

The  failure  to  accomplish  respectable  results  from  the  Bituminous  Coal  Industry  is  mainly 
due  to  disregard  of  a  few  elementary  propositions. 

The  cost  of  production  has  to  be  met,  and  is  met,  if  not  fully  out  of  the  price  collected  from 
consumers,  then  the  deficit  is  met  out  of  the  producer’s  capital,  or  if  his  capital  be  exhausted,  it 
is  imposed  upon  his  creditors.  Because  this  last  contingency  has  been  so  often  realized,  the  credit 
of  the  industry  is  low  and  coal  securities  as  a  class  have  no  standing. 

Though  from  time  to  time  unusual  conditions  supervene,  permitting  operators  (who  have 
been  able  to  survive  since  the  last  time  of  unusual  conditions)  to  partially  recover  their  operating 
losses,  such  circumstance  is  purely  fortuitous  and  not  creditable  to  the  men  in  the  industry. 

The  coal  business  should  be  profitable  at  all  times,  and  can  be  made  so,  if  operators  will  base 
their  commercial  policies  upon  the  requirements  of  the  industry,  with  due  regard  to  the  cost  of 
doing  business. 

Every  operator  to  be  successful  must,  in  his  selling  policies,  take  into  consideration  his  cost 
of  production  under  proper  and  conservative  methods  of  mining,  and  the  upkeep  of  mine  workings, 
building  and  machinery  in  safe  and  efficient  condition — and  with  due  regard  to  the  safety  of  men 
employed  and  to  the  wage  scales  and  conditions  provided  in  the  contract  with  the  miners,  the 
reserves  necessary  to  provide  for  the  payment  of  debts  and  to  redeem  the  invested  capital  and  to 
pay  a  fair  return  thereon. 

The  reserves  necessary  for  the  payment  of  taxes,  insurance  and  indemnity  for  killed  and  in¬ 
jured  employees  and  the  other  contingencies  of  the  business. 

Any  coal  operator  can  settle  the  question  as  to  the  necessary  charge  for  capital  redemption 
in  a  practical  and  reasonable  way  by  adding  investment  and  liabilities  together  and  deducting 
therefrom  quick  and  realizable  assets.  The  remainder  is  the  amount  which  must  be  recovered  by 


21 


the  operation  of  the  property.  In  some  cases  it  may  be  more  than  authorized  depletion  and  depre¬ 
ciation. 

It  must  be  gotten  out  of  the  proceeds  of  coal  sold — there  is  no  other  way  to  get  it. 

This  amount,  divided  by  the  estimated  number  of  tons  available  through  the  present  shafts 
or  openings,  will  give  the  amount  per  ton  necessary  to  include  in  the  cost  of  coal  to  be  recovered 
in  the  selling  price. 

Indemnity  for  killed  and  injured  workmen  is  an  inevitable  item  of  cost,  and  provision  for  this 
must  not  be  overlooked,  either  by  those  who  carry  insurance  and  pay  a  premium,  or  those  who  meet 
this  cost  out  of  a  fund  set  up  for  that  purpose. 

Society  has  always  borne  the  burden,  indirectly  and  inadequately,  but  statutes  passed  by 
State  and  Federal  Governments  providing  for  workmen’s  compensation  are  evidence  that  public 
policy  now  sanctions  the  assumption  of  this  indemnity  in  a  businesslike  and  adequate  manner. 

These  laws  are  not  for  the  purpose  of  penalizing  industry,  but  for  the  purpose  of  enabling  the 
recipient  of  indemnity  to  collect  at  the  source.  It  is,  of  course,  expected  that  the  employer  will  so 
arrange  his  affairs  as  to  recover  this  with  his  other  expenses  in  the  price  received  for  his  coal. 

It  may  be  safely  predicted  that  before  long  workmen’s  compensation  will,  bylaw,  be  obligatory 
upon  all  employers.  At  this  time  none  of  the  laws  nor  their  administration  is  satisfactory,  either 
to  labor  or  capital — and  amendments  are  constantly  being  sought.  Before  long  the  matter  will 
have  to  be  taken  up  and  settled  definitely,  and  a  careful  study  of  the  questions  involved,  based  on 
experience,  is  important,  so  that  we  may  properly  present  our  arguments  and  intelligently  influence 
legislation  so  as  to  get  the  laws  just  and  equitable  to  all  interests  involved.  Until  then,  and  after¬ 
wards,  no  Operator  should  fail  to  include  a  liberal  provision  for  this  cost  in  his  selling  price. 


CONCLUSION. 

In  submitting  the  foregoing  suggestions  as  to  a  Standard  System  of  Accounting  and  Analysis 
of  Cost  of  Production,  we  fully  appreciate  that  many  operators  have  highly  developed  systems  with 
which  they  are  fully  justified  in  being  well  satisfied,  but  we  are  sure  that  the  advantages  of  uniformity 
of  practice  will  appeal  to  them. 

The  many  whose  accounting  methods  leave  much  to  be  desired  will  derive  the  most  benefit 
from  adopting  a  proper  accounting  system.  They  will  know  better  how  they  stand,  what  they  must 
have  to  cover  their  requirements,  and  proper  accounting  will  help  them  to  exercise  the  tenacity 
and  perseverance  requisite  for  the  salvation  of  their  capital  and  to  win  a  proper  return  thereon. 

An  accounting  system  will  not  run  itself,  nor  in  itself  reduce  costs,  nor  increase  efficiency;  this 
is  up  to  the  operator  himself ;  he  must  study  and  compare,  vitalize  the  figures,  and  act  on  the  facts 
they  illuminate. 

We  realize  that  those  who  do  not  understand  accounts  or  like  accounting  are  apt  to  be  dis¬ 
dainful  of  accounts  and  statistics  and  to  overestimate  the  expense  and  labor  involved  in  proper 
accounting;  but  the  business  that  is  run  without  a  proper  accounting  system  is  subject  to  hap¬ 
hazard  financing  and  courting  disaster. 

Furthermore,  the  operator  who  conducts  his  selling  campaigns  without  due  regard  to  the 
requirements  of  the  industry  as  a  whole,  as  reflected  in  the  cost  of  doing  business,  is  an  unfair  com¬ 
petitor. 

We  respectfully  submit  this  report  with  the  hope  that  the  suggestions  therein  contained  will 
be  helpful  in  accomplishing  that  important  work  in  which  so  much  interest  has  been  expressed. 


Chicago,  Illinois, 
May  21,  1919. 


C.  E.  Bockus 
Thos.  T.  Brewster 
W.  M.  Henderson  Committee 
J.  C.  Osgood 
Erskine  Ramsey 
W.  B.  Reed,  Secretary 


22 


SHORT  FORM 


Coal  Company 


Income  Statement,  Month  of ,  1919. 


Tons  of  Coal  Produced,  realizing  net  at  mine  _  __  _ 

General  Expense 

Administration  expense _ _  _ 

Selling  Expense 

All  exnenses  of  sales  denartment- 

Mine  Operating  Expense 

(a)  Wages  and  compensation  of  all 
employees  in  and  about  the  mine 

(b)  Material  and  supplies — 

All  material  and  supplies  con¬ 
sumed  in  and  about  the  mine.. 

Employer’s  Liability 

Premiums  on  policies  if  insurance  is  cf 
vision  as  niav  be  made  therefor,  if  no  ir 

irried,  or  such  pro- 
lsuranee  is  carried 

Fire,  Boiler  and  Tornado  Insurance 

Premiums  on  policies,  or  provision  if  self-ins 

Depreciation  and  Depletion 

A  definite  provision,  preferably  a  fixed  charg 
redeem  canit.al 

ured. 

e  per  ton  to 

Taxes 

Proper  provision  for  Federal,  State  and  Local  Ta: 

Interest 

Interest  accrued  on  outstanding  interest-bearing  o 
tions  or  other  interest  paid  during  the  period  cover 
the  cost  sheet  _ 

KCS 

bliga- 
ed  by 

Total  _  . 

Margin  on  Coal _  ... 

Other  Income 

Total  Income  for  Month 

Contingent  Reserve 

Net  Income  for  Month 

23 


COST 


LABOR 

SUPPLIES 

TOTAL 

Amount 

Per  Ton 

I. 

1 

Mine  .  _  -  ...  _ 

Operating  Expenses 

2 

3 

4 

5 

6 

7 

8 
9 

10 

11 

12 

13 

14 

15 

16 

17 

18 

19 

20 

Mine  Office _  - 

Superintendence  .. . 

Engineering _ 

Mining.  .  _  _  _ 

_ 

Timbering _  ..  ..  _ 

Deadwork _  _  _ 

Track  Laying . . . . 

Drainage _  _  . 

Ventilation _ 

Haulage  and  Hoisting. _ 

Dumping  and  Tallying..  _ _ 

Preparation _  _  — 

Railroad  Car  Loading  and  Yard 
Expense _ _ _ _ 

Power _  _  .. 

Repairs  to  Buildings  and  Per¬ 
manent  Structures.  _ _ _ 

Sundries  ..  .  .  _ _ _ _ 

21 

Total  Mine  Operating  Expense 

22 

23 

24 

25 

26 

27 

28 
29 

General  Expense _ _  .  _ 

Officers’  Salaries  and  Expense.  . 

Other  Salaries . .  . . 

Rent  and  Miscellaneous  Office 
Expense _ _ _ _ _ 

Legal  Expense  ..  . . . 

30 

Total  General  Expense 

31 

Total  Operating  and  General 
Expense  (add  lines  21  and  30) 

32 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

Selling  Expense  _ 

Officers’  Salaries  and  Expenses  _ 
Salesmen’s  Salaries  and  Expenses 
Other  Office  Salaries  .  .  _ 

Rent  and  Other  Office  Expense 
Advertising _ _ ...  .. 

Commissions _  .  . 

Miscellaneous _ _ 

, 

43 

Total  Selling  Expense 

44 

Total  Operating,  General,  and 
Selling  Expense  (add  31  and  43) 

45 

46 

47 

48 

49 

50 

51 

52 

53 

Other  Operating  Charges _ 

Royalty..  ..  .  .  _ 

Depletion  Reserve _ 

Depreciation  Reserve. _ 

Insurance — General  _  __ 

Insurance — Liability  or  Compen¬ 
sation _ _ _ _ 

Taxes  (exclude  Income  and  War 
Profits) _  ..  _ 

54 

Total  Other  Operating  Charges 

55 

Total  Operating  Charges  (add 
lines  44  and  54) . . . 

24 


INCOME 


— 

Amount 

Per  Ton 

56 

57 

58 

59 

60 
61 
62 

63 

64 

Coal  Sales  -  _  _  _.  ..  -  _  - 

TONS 

Local  _  _  -  --  _  - 

Shipped  _  _  _  -- 

Railroad  -  -  -  _ _  _  - _ 

To  Boat  _  _  _ 

To  Coke  Plant  _ _  _ 

To  Washer  _  .  --  _ - _ _ - 

To  Power  Plant _ _ _ _ _  - _ - 

65 

Gross  Sales  _ _ _ _  - 

66 

67 

68 

69 

70 

Deductions  _ _  --  -  _ 

Less  Freight  Prepaid  -  -  -  _  _  .  . _ 

Less  Allowances  and  Adjustments  _  -  -  _ _  _ 

71 

72 

73 

Total  Deductions  _  _  _  _ _ 

Net  for  Coal  at  Mine  _ _  _ 

Less  Total  Operating  Charges  (Line  55)  -  _  ...  .. 

74 

Margin  on  Coal  _ _  _  _  _ 

75 

76 

77 

78 

79 

80 
81 
82 

83 

84 

85 

86 
87 

Other  Income  _  _  _  .  ... 

Profit  or  Loss,  Explosives  .  _ _  _  _  .  _ 

Smithing  _ _  .  _ _ _  ..  _ ... 

Heat,  Light,  and  Power  _  _ _  _ _ 

Dwellings  and  Farms  .  _  _ _ _ _ _  ..  _ 

Stores  _  _  ..  .  ..  ..  .  .  _ _  .  _  _ 

Profit  or  Loss,  Washer  Operations  _ _ _  _  _  .  _ _ 

Profit  or  Loss,  Coke  Plant.  .  ..  .  .  _ _  .  .  _  . 

Floating  Equipment  .  _ _  _ 

Railroad  Equipment  . .  _ _  _  _  _  ..  .  .  .  _  . . 

88 

Total  Miscellaneous  Income _  _  _  ..  _ 

89 

Gross  Income  (Add  lines  74  and  88) _ _  _ _  _  _ 

90 

91 

92 

93 

94 

95 

96 

Charges  to  Income _ _  _  ..  .  _  _ 

Interest.  .  _ _  _  _  .  .  _ _ 

Income  and  War  Tax..  _ _  .  . . .  . . .  . 

Contingent  Reserve _ _  .  .  _ _ _  _  .  _  . 

Maintenance  Reserve  .  _  .  .  .  .  ..  .  .  _.  _ 

97 

Total  Charges  to  Income _ _ _ _ _  _ 

98 

Net  Income  (subtract  97  from  89) _  _ _  .  _ _  _ _  . 

25 


COMPARATIVE  AND  TOTAL  INCOME  STATEMENT— All  Mines 

National  Association  Coal  Company  Month  of  ,  19 


Mine  No.  1 

Mine  No.  2 

Mine  No.  3 

Mine  No.  4 

Total — All  Mines 

Amount  |  Per  Ton 

Amount  |  Per  Ton 

Amount  |  Per  Ton 

Amount  |  Per  Ton 

Amount  |  Per  Ton 

Tons  Produced. 

1  Net  at  Mines _ 

Mine  Operating  Expense 

2  Mine  Office _  .  ... 

3  Superintendence. __ 

4  Engineering  ... 

5  Mining  _. 

6  Timbering  ...  _ 

7  Deadwork..  ... 

8  Track  Laying.  ....  _  _ 

9  Drainage.  ... 

10  Ventilation  _  _  . 

11  Hauling  and  Hoisting 

12  Dumping  and  Tallying  .  . 

13  Preparation _ 

14  Railroad  Car  Loading  and  Yard  Expense 

15  Power _ 

16  Repairs  to  Buildings  and  Permanent 
Structures _ 

17  Sundries _ 

18  _ 

19  

20  Total  Mine  Operating  Expense  Add  2  to  19 

21  General  Expense  .. 

22  Selling  Expense. ..  .  

23  Total  Mine  Operating,  Gen’l  and 
Selling  (Add  20,  21,  22) 

Other  Operating  Charges 

24  Royalty _ 

25  Depletion  Reserve _ 

26  Depreciation  Reserve  ..... 

27  Insurance — General _  _ 

28  Insurance — Liability  or  Compensation 

29  Taxes  (exclude  Income  and  War  Profits) 

30  

31  Total  Other  Operating  Charges 
(Add  24  to  30) 

32  Total  Operating  Charges  (Add  23  and  31) 

33  Margin  on  Coal  (Deduct  32  from  1  _ 

34  Other  Income   

35  Gross  Income  (Add  33  and  34   

Charges  to  Income 

36  Interest _ 

37  Income  and  War  Tax _ _ 

38  Contingent  Reserve _ 

39  Maintenance  Reserve _ 

40  

41  Total  Charges  to  Income  (Add 

36  to  40) 

42  Net  Income  (Deduct  41  from  35) _ 

SUGGESTED  FORM  FOR  DISTRIBUTION  OF  MINE  LABOR  IN  CONFORMITY  WITH  REJ?ORT  OF  COST  ACCOUNTING  COMMITTEE  OF  THE  NATIONAL  COAL  ASSOCIATION. 

Notb. — Numbers  in  first  column  correspond  with  those  on  cost  sheet  page  23  of  report  as  revised. 


Account 

No. 


Class  of  Labor 


Miners . 

Helpers . 

Shot  firers 


.tons  at _ 


I  a  Hand  mining  (Sub-total) . 

Undercutting  . tons  at . 

Moving  machines  for  cutters . 

b  Undercutting  (Sub-total) . 


Machine  boss . 

Electricians  and  helpers.  . 
Blacksmith  and  helper. . . 
Sharpening  picks . 


c  Mining  machine  repairs  and  maintenance. ... . 

d  Pit  car  loading . tons  at . 

II  e  Machine  mining  (Sub-total),  b,  cand  d . . 

Company  coal,  tons  only . . . . 

1  Mining,  Total  a  and  e, - pay  roll  ion*  produced 

Pit  posts  and  caps . 

Teamster  hauling  same. . . 

Unloading  from  railroad  cars . 

Sending  timber  into  mine . is.... . 


3  Timbering. 


Entry  yardage . 

Air  courses . . 

Cross  cuts _ : _ 

Break  throughs. . .  . 
Room  necks . . . 


a  Narrow  work  (sub-total) . 

Clay  veins . . . 

Spars . . . .  ’ ' 

Horsebacks.  . . .'. . !.!.'!!!! 

Bone . . 

Shooting  rock . ) . 

Lifting  bottom . . . 

Taking  down  top. .  . 

Stowing  and  dumping  gob.  . . 

Cleaning  up  falls  and  retiinbering . 

Handling  squeezes . 

Mine  fires . . 


b  (Sub-total)... 
Dead  Work,  Total  a  and  b. 


Trackmen  or  roadmen  (advance  work).  .. 
Helpers  (advance  work) . 


5  Tracklaying 


Pumpers . . . 

Pipemen . .  )  „ 

Water  bailers . 

Water  haulers . 

Digging  drains  and  sumps. . . . 

Electricians . ’ 

Blacksmiths . 

Other  labor . 


6  Drainage . 


Item 


Sub- 

Total 


*  •  • 
•  »  • 
•  *  • 


*  •  • 
•  *  • 


*  •  * 
•  *  • 
•  •  » 
•  •  • 


*  •  • 
•  •  • 
•  •  * 
•  •  • 
•  •  • 


•  •  • 
•  •  • 


•  *  » 
•  •  • 
0  0  0 
•  •  • 
*  *  * 
•  •  * 
0  0  0 
•  •  O 


Amount 


Account 

No. 


Class  of  Labor 


Attending  fan . 

Brattice  man . 

Masons  and  helpers . 

Sprinkling . . . 

Fire  bosses . . . 

Cleaning  air  courses . 

Safety  lamp  attendant . . : . 

Repairs  to  fan . 

Repairs  to  other  ventilating  equipment. . . 

Repairs  to  safety  lamps . 


Item 


Sub- 

Total 


7  Ventilation. 


#  * 
•  • 


Hoisting  or  haulage  engines  (repairs) . 
Labor  of  other  mechanics . 


a  Repairs  to  haulage  engines  (sub-total). 

Electrician . 

Motorman . 

Blacksmith . 

Labor  of  other  mechanics . 


b  Repairs  and  maintenance  of  motors. 

Carpenters . 

Blacksmiths . ; 

Other  labor . 


C  Repairs  and  maintenance  of  mine  cars . 

Stable  boss . 

Helpers . . . 

Harness  repairs . 

Shoeing . * 

d  Care  and  maintenance  of  live  stock  . 

I  Care  and  maintenanceofequipment,fotala,b,c&  d 

Boss  driver .  . 

Drivers . 

Brakemen . ' ' 

Mortormen . 

Hoisting  engineer  (shaft) . 

Haulage  engineer  (drift  or  slope) . 

Trip  riders . 

Couplers  trappers . . 

Greasers . 

Spraggers . *...!!!!!!!!”, 

Switchmen . 

Drying  sand  for  locomotives . 

Bottom  cagers . 

II  Conducting  transportation .  . 


Roadmen — Repamng  and  cleaning.  , 
Helpers . 


Ill  Maintenance-of  way  (Sub-total). 

8  Haulage  and  Hoisting,  total . 


Weigh  master . 

Dumpers . . . 

Pushers . . . 

Top  cagers . 


*  Dumping  and  Tallying. 


*  •  » 
•  •  • 
•  •  • 
*  •  • 
•  •  • 
9*1 
*  •  * 

*  •  t 

•  •  • 
0  0  0 


0  0  0 
0  0  0 


0  0  0 
0  0  0 
0  0  0 
0  0  0 


0  0  0 
0  0  0 


0  0  0 
0  0  0 
•  .  *  • 
0  0  0 


0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 
0  0  0 


0  0  0 
0  0  0 


0  0  0 
0  0  0 
0  0  0 
0  0  0 


Amount 


0  0 
0  0 
0  0 
0  0 


Account 
No. 


Class  of  Labor 


Picking  table  labor . 

Loading  boom  labor . 

Other  preparation  labor . 


10  Preparation . 


Yard  boss.  . . . » . 

Trimmers . . . . .!!!!! 

Checkers . 

Car  Cleaners . . 

Brakemen . ■ . ..!!!!!!! 

Maintaining  and  operating  mine  tracks . 


11  Railroad  Car  Loading  and  Yard  Expense. 


Firemen . 

Engineers . 

Cleaning  boilers . 

Handling  ashes . 


a  Generating  power  (Sub-total) . 

Bricklayers  and  helpers . 

Masons  and  helpers . 

Carpentere . 

Electricians . 

Boilermaker . 

Other  labor . . . 


b  Equipment  repairs  (Sub-total). 

Sub-station  attendants . 

Electricians . 


c  Purchased  power. . . 


12  Power,  total  a,  b  and  c . 

Carpenters . . 

Painters . . . 

Other  labor . . 

13  Repairs  to  Buildings  and  Strcutures . 


Item 


Clerks. 

Janitor. 


M 


Mine  Office . 

Superintendent . 

Assistant  superintendent. 

Mine  foreman . 

Assistant  mine  foreman.  . 


Superintendence 
Engineering . 


Sending  supplies  to  mine. 

Warehouse . 

Teamsters . . 

Unloading  supplies ...... 


a  General  outside  labor . 

b  Welfare  work  at  mine . 

Sundries,  total  a,  b,  etc . 

Total  Mine  Operating  Expense . 


Sub- 

Total 


Amount 


•  «0 

0  0  0 


0  0  0 
0  0  0 
0  0  0 


0  0 
0  0 
0  0 
0  0  0 
0  0 
0  0 


0  0 

0  0 


0  % 


0  0  0 
0  0  0 
0  0  0 
0  0  0 


0  0 
0  0 
0  0 


0  0 
4  0 


0  0 
0  0 
0  0 
0  0 


0  0  0 
0  0  0 
0  0  0 
0  0  0 


0  0 
0  0 
•  0 
0  0 


Sheet  l 

For  Name  of  Compan; 

19 

Report  of  Cost,  Income  and  Tonnage 

For  Month  of 

COST 

line 

No. 

ACCOUNT 

CURRENT  MONTH 

YEAR  TO  DATE 

LABOR 

SUPPLIES 

TOTAL 

LABOR 

SUPPLIES 

TOTAL 

Amount  Per  Ton 

Amount 

Per  Ton 

Amount  |  Per  Ton 

Amount 

Per  Ton 

Amount 

Per  Ton 

Amount 

Per  Ton 

1 

1 

2 

8 

4 

5 

(! 

7 

8 

9 

10 

11 

11 

13 

14 

15 

10 

17 

18 

Mine  . 

Operating  Expenses . 

Mining  . 

Timbering  . 

Dcadwork  . 

Track  Laying . . 

Drainage  . 

Ventilation  . 

Haulage  and  Hoisting . 

Dumping  and  Tallying . 

Preparation  . 

Kallronri  Car  Loading  and  Yard  ICx 

porno  . 

Power  . 

Ucpnlra  to  Fundings  and  Forma 
nont  Structures . 

Mine  Office . 

Superintendence  . 

Engineering . 

Sundries  . 

10 

20 

Total . 

Additions  or  deductions  account  of 
sale  of  explosives,  etc . 

•J1 

Total  Mine  Operating  Expense 

21 

13 

21 

25 

28 

'.7 

23 

29 

30 

81 

82 

Other  Operating  Charges . 

Royalty  . 

Depletion  . 

Depreciation  . 

Insurance — General . 

Insurance* — Liability  or  Compensn 

tlon  . 

Taxes  (exclude  Income  and  War 
Profits)  . 

Total  Other  Operating  Charge? 

Total  Opel  sting  (add  lines  21 
and  31) . 

Sheet  2 


For  Name  of  Company 


Report  of  Cost,  Income  and  Tonnage 

For  Month  of _ 


COST 


Line 

Ko. 

ACCOUNT 

CURRENT  MONTH 

YEAR1TO  DATE 

LABOR 

SUPPLIES 

TOTAL 

TOTAL 

Amount 

Amount 

Amount 

Per  Ton 

Amount 

Per  Ton 

33 

34 

35 

36 

37 

38 

39 

40 

41 

42 

General  Expense . 

Officers’  Salaries  and  Expenses.. 

Other  Salaries . 

Rent  and  Miscellaneous  Office  Ex¬ 
pense  . 

Legal  Expense . 

Total  General  Expense . 

Total  Operating  and  General^ 
Expense  (add  lines  32  and  41) 

43 

44 

45 

46 

47 

48 

49 

50 

El 

52 

53 

64 

Selling  Expense . 

Officers’  Salaries  and  Expenses.. 
Salesmen’s  Salaries  and  Expenses 

Other  Office  Salaries . 

Rent  and  0;her  Office  Expense.. 
Advertising  . 

Commissions  . 

Miscellaneous . 

Total  Selling  Expense . 

55 

Total  Operating,  General  and 
Selling  Expense  (add  42  &  53) 

• 

Sheet  3 

For  Name  of  Company 

Report  of  Cost,  Income  and  Tonnage 

For  Month  of _ 


INCOME 


Line 

No. 

TONS 

CURRENT  MONTH 

YEAR  TO  DATE 

Current  Mo. 

Year  to  Date 

Amount 

Per  Ton 

Amount 

Per  Ton 

66 

67 

68 

69 

eo 

61 

62 

63 

64 

Coal  Sales . 

Sales  Per  Railroad  Weights . 

Delivered  to  Locomotives . 

Local  Sales  at  Mines . 

Coal  Coked . 

Raw  Coal  to  Washery . 

To  Power  Plant . 

To  Dwellings . 

Adjustment  of  Inventories . 

(Plus  or  minus) 

65 

Gross  Sales  (produced  coal).... 

66 

67 

68 

69 

70 

71 

Total  Deductions . 

72 

73 

74 

75 

76 

77 

78 

79 

80 

81 

82 

83 

84 

85 

86 

87 

88 

Net  for  Coal  at  Mine . 

Less  Total  Operating  Charges  (Line  55) . 

Margin  on  Coal . 

i 

j 

Profit  or  Loss,  Explosives  (  gee  optional  deduction  from  /  . 

Smithing  .  j  operating  expenses  line  20  f 

Heat,  Light  and  Power . 

Dwellings  and  Farms . 

Stores  . 

Profit  or  Loss,  Washer  Operations . 

Profit  or  Loss,  Coke  Plant . 

Floating  Equipment . 

Railroad  Euipment . 

Purchased  Coal . 

Total  Miscellaneous  Income . 

> 

89 

90 

91 

92 

93 

94 

95 

96 

97 

98 

99 

Gross  Income.  (Add  lines  74  and  88) . . 

Charges  to  Income  Deductible  for  Federal  Taxes . 

Interest  (Paid  or  accrued) . 

Charges  to  Income  Not  Deductible  for  Federal  Taxes  . 

Income  and  Excess  Profits  Taxes . 

Contingent  Reserve  (Mining  hazard) . 

Maintenance  Reserve . 

Total  Charges  to  Income . 

Net  Income  (Subtract  98  from  89) . 

100 

Taxable  Net  Income  (Subtract  91  from  89) . 

Sheet  4 

For  Name  of  Company 

Report  of  Cost,  Income  and  Tonnage  For  Month  of 

Tonnage  Statement— Net  Tons  of  2000  Pounds 

(Report  part  tons  as  decimals) 

CURRENT  MONTH 

Line  No. 

Disposition  Made  of  Coal 

Prepared 

Mine  Run 

Screenings 

Total 

101 

102 

103 

104 

105 

106 

107 

108 

109 

Invoiced  to  Customers — 

Sales  per  Railroad  Weights . 

Delivered  to  Locomotives . 

Local  Sales  at  Mines . 

Departmental  Transfers — 

Coal  Coked . 

Raw  Coal  to  Washery . 

To  Power  Plant . 

To  Dwellings  . 

110 

Sub-total . 

111 

Add  Estimated  Inventory — Coal  on  Hand 
and  Rolling  Last  of  this  Month . 

t 

113 

Total . 

114 

Deduct  Estimated  Inventory  —  Coal  on 
Hand  and  Rolling  First  of  Month.... 

116 

Total  Production  (Divisor  for  Cost).. 

THIS  YEAR  TO  DATE 

Line  No. 

Disposition  Made  of  Coal 

Prepared 

Mine  Run 

Screenings 

Total 

101 

1C2 

103 

104 

105 

106 

107 

108 

109 

110 

Invoiced  to  Customers — 

Sales  per  Railroad  Weights . 

Delivered  to  Locomotives . 

Local  Sales  at  Mines . 

Departmental  T ransfers — 

Coal  Coked . 

Raw  Coal  to  Washery . 

To  Power  Plant . 

To  Dwellings  . 

Sub-total . 

111 

Add  Estimated  Inventory — Coal  on  Hand 
and  Rolling  Last  of  this  Month . 

113 

Total . 

114 

Deduct  Estimated  Inventory  —  Coal  on 
Hand  and  Rolling  First  of  Month.... 

1  116 

Total  Production  (Divisor  for  Cost).. 

* 


- 


. 


26 


Dr. 


MINE  OPERATING  EXPENSE  (Each  Mine). 


Cr. 


Pay  Rolls 

Close  out  to  Operating  Account 

Material  and  Supplies  Used 

Dr. 


OPERATING  ACCOUNT  (Each  Mine). 


Cr. 


Loss,  if  any,  Departments  connected  with  this 
Mine 

Proportion  General  Expense 
Proportion  Selling  Expense 
Mine  Operating  Expense 
Royalties 

Employer’s  Liability  paid,  or  Insurance 
Fire,  Boiler  or  other  Insurance  on  Plant 
Taxes  (not  Income) 

Depreciation 

Depletion 

Close  out  to  Income  Account 


Net  for  Coal  at  Mine 

Profit  on  Departments  connected  this  Mine 


Dr. 


INCOME  ACCOUNT. 


Cr. 


Operating  Deficits,  if  any 

Operating  Accounts 

Interest  paid  or  accrued 

Interest  received  or  accrued 

Income  and  Excess  Profit  Taxes 

Other  Income  (not  Operating) 

Other  Federal  Taxes 

Contingent  Reserve 

Other  Voluntary  Reserves 

Close  out  to  Profit  and  Loss 

Dr. 


PROFIT  AND  LOSS  (Profits  applicable  to  Dividends).  Cr. 


Dividends 

Transfers  from  Income 

Transfers  to  Surplus 

